Taxable Investment Account

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tomd37
Posts: 2810
Joined: Thu Mar 01, 2007 10:39 pm
Location: Middle Tennessee

Taxable Investment Account

Post by tomd37 » Wed Jun 13, 2018 9:39 am

Based on reading some recent posts I have a question about ownership of a small taxable (non-IRA) investment account representing about 5% of our total investments with Vanguard.

The Vanguard account is established as John Doe & Jane Doe, JT TEN WROS. We are both in early 80's and I am beginning to wonder if this was the best way to set up the account. In particular what happens to the cost basis when one of us passes? Is part of the investment stepped up in basis as of the date of death of one owner? Would there be a better way to own this account?
Tom D.

livesoft
Posts: 61944
Joined: Thu Mar 01, 2007 8:00 pm

Re: Taxable Investment Account

Post by livesoft » Wed Jun 13, 2018 9:44 am

I think you are fine if you are married and live in Texas. But what state do you live in? That may change the answer since the answer depends on state law.

(Yes, I see "Middle Tennessee", but maybe you are trying to mis-direct.)
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tomd37
Posts: 2810
Joined: Thu Mar 01, 2007 10:39 pm
Location: Middle Tennessee

Re: Taxable Investment Account

Post by tomd37 » Wed Jun 13, 2018 9:58 am

Yes, we do live in Tennessee. While we do not have an income tax per se, we do currently have the Hall Tax which in a tax on limited interest income items plus taxes on dividends, capital gain distributions, and non-dividend distributions. The Hall Tax is 3% this year and decreases 1% per year for each of the next two years and then finally ends.
Tom D.

MrBeaver
Posts: 137
Joined: Tue Nov 14, 2017 4:45 pm

Re: Taxable Investment Account

Post by MrBeaver » Wed Jun 13, 2018 10:00 am

This may help:
viewtopic.php?t=249628

We live in a community property state, and used to have an account setup as JTWROS. After reading this and other research, we switched it to CPWROS to ensure 100% basis step-up instead of 50%. Doing so through Vanguard required filling out paper forms to do the in-kind transfer once the CPWROS account was set up.

livesoft
Posts: 61944
Joined: Thu Mar 01, 2007 8:00 pm

Re: Taxable Investment Account

Post by livesoft » Wed Jun 13, 2018 10:41 am

I read the other link and also read the links in it. They answer questions not asked such as selling property and who inherits the property. They don't directly address the step-up basis of 50% or 100% and leave that dangling. For instance JTWROS in a community property state still gets 100% step up basis upon death of a spouse if the property is jointly owned by a married couple. If jointly owned by non-married people, then I don't know what happens. And in a non-community property state, I don't know what happens, but I can guess.
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