[WSBAPT] WA Estate Tax Determination - Inclusion or Exclusion of Bank Account

[Philip N. Jones]

Let’s assume this was a joint (survivorship) account at the time of death.
No gift took place unless the surviving brother made a withdrawal during the decedent’s lifetime.  There are lots of cases/rulings/regs that confirm that result.  For example, Reg. 25.2511-1(h)(4); Reg. Rev. Rul. 69-148.  No gift, no gift tax, no gift tax return, unless the brother made a withdrawal.
As for the estate tax, this situation is squarely covered by section 2040(a).  If the decedent provided 100% of the funds in the account, then the account is 100% includable in the decedent’s gross estate for estate tax purposes.  If the decedent provided 37% of the funds, then 37% of the funds are includable.  If the decedent provided 99% of the funds, then 99% are includable.  It is not a question of who contributed “most” of the funds in the account.  Reg. 20.2040-1(a)(2).
There is no presumption of a 50/50 contribution.  Section 2040(a).
But if we change the facts, and the two co-owners were married to each other, then the account is 50% includable regardless of how much each contributed.  That is not a presumption.  It is the result dictated by statutory law.  Section 2040(b).
In short, the accountant is incorrect (if the account was joint), the department is correct (except for the part about “most”), and the PR is incorrect if he/she thinks you are “overdoing it.”
Phil Jones
Portland, OR

Philip N. Jones
Duffy Kekel LLP
Portland, OR
pjones at duffykekel.com
(503) 226-1371

On May 29, 2020, at 5:34 PM, John J. Sullivan, Esq. <sullaw at comcast.net> wrote:


Matthew:

Assuming this is a JTWROS account I do not believe a completed gift has occurred without the decedent having removed himself from the account while alive. I probably would have prepared a “gift deed” to memorialize it. In addition, depending on the size of the dead brother’s interest a gift might have triggered a Form 709 obligation to the IRS.

My understanding is that a presumption of 50/50 ownership by two joint tenants is presumed, rebuttable by evidence of unequal contributions.

So while there was a gift, it was testamentary, not intervivos, as far as I can see.

John J. Sullivan

From: wsbapt-bounces at lists.wsbarppt.com <wsbapt-bounces at lists.wsbarppt.com> On Behalf Of Matt Yates
Sent: Friday, May 29, 2020 4:07 PM
To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com>
Subject: [WSBAPT] WA Estate Tax Determination - Inclusion or Exclusion of Bank Account

I have a probate action where PR is deferring to accountant about determination of WA Estate Tax but there is an issue as to whether to include the bank account decedent had with Decedent’s Brother (“Brother”).  I am trying to get PR to get appropriate information from bank as to how account was “owned” but accountant is convinced that Decedent co-owned account with Brother and, therefore, it was a gift to Brother.  Said another way, it appears that accountant is trying to distinguish this account from a typical survivor or beneficiary designated account and declare it as a gift to get it out of the estate.  I did contact WA Dept of Revenue and the representative I spoke to says that the Dept considers who deposited the money in the account to determine whether it is part of the estate (i.e. if Decedent deposited most or all, it is part of the estate).

Accordingly, I have a few questions.

  1.  Has anyone run into a scenario accountant wants to says exists where a co-owned (this actually has yet to be determined) bank account was considered a gift rather than a beneficiary designated account/survivor account and thereby excluded from the estate for purposes of determining value of estate and corresponding estate tax?  If so, what were the indicators that Dept accepted to demonstrate gift, if any?
  2.  Given how the Dept lists its rulings on its website (nondescript volumes), does anyone know of an applicable ruling?

Thanks and I’ll continue to try to balance research with PR concerns about overdoing it.
Matt

Matthew D. Yates
Attorney at Law
Yates Marshall, PLLC
10000 NE 7th Avenue, Suite 200
Vancouver, WA 98685
Phone: (360) 449-6100
Fax: (360) 449-6111
matt at yatesmarshall.com<mailto:matt at yatesmarshall.com> (New Email Address)
www.yatesmarshall.com<http://www.yatesmarshall.com>

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