Simple estate planning question regarding basis step-up on jointly titled account

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
walkerbait
Posts: 13
Joined: Tue Jan 17, 2017 9:01 pm

Simple estate planning question regarding basis step-up on jointly titled account

Post by walkerbait » Sat Jan 13, 2018 1:26 am

I have searched for an hour and can't seem to come up with the answer. This is an estate-planning question as I try to determine whether to change an account from an individual account in my name to a joint account with my spouse.

We live in a non-community property state. I understand that the way it is now, with me holding the account individually, that if I die my spouse will get a 100% step-up in basis. If she dies, I will get no step up.

If I change it to a joint account, we will each get a 50% step-up if the other dies.

Here's my question: Let's say it is a joint account, and one of us dies first, so the other assumes ownership with a 50% step-up in basis. Subsequently (months or years later) this account is inherited by our children and the value has increased again. Do they get a full step-up in basis, or will their basis be somewhere in the middle?

Specific scenario in case it's not clear: Joint brokerage account, assume no dividends reinvested for simplicity
Original Basis: $50k
Value when spouse A dies: $100k
Value when spouse B dies: $200k

Basis for child who inherits = $200k? That's my guess. But I could also see it being a basis of $150k if the Spouse A assets aren't permitted a "second" step-up.

If the beneficiary gets a full step-up to $200k in this example, does this require that Spouse B re-titled the account to an individual account after Spouse A died?

Gill
Posts: 3752
Joined: Sun Mar 04, 2007 8:38 pm
Location: Florida

Re: Simple estate planning question regarding basis step-up on jointly titled account

Post by Gill » Sat Jan 13, 2018 7:46 am

The surviving spouse would own the account outright and therefore a full step up at the subsequent death.
Gill

RudyS
Posts: 914
Joined: Tue Oct 27, 2015 10:11 am

Re: Simple estate planning question regarding basis step-up on jointly titled account

Post by RudyS » Sat Jan 13, 2018 10:35 am

Gill wrote:
Sat Jan 13, 2018 7:46 am
The surviving spouse would own the account outright and therefore a full step up at the subsequent death.
Gill
And, this may be obvious, the account should then be retitled to just the surviving spouse.

walkerbait
Posts: 13
Joined: Tue Jan 17, 2017 9:01 pm

Re: Simple estate planning question regarding basis step-up on jointly titled account

Post by walkerbait » Sat Jan 13, 2018 10:47 am

All how I was thinking it would take place. Good to know for sure. Thanks!!

Gill
Posts: 3752
Joined: Sun Mar 04, 2007 8:38 pm
Location: Florida

Re: Simple estate planning question regarding basis step-up on jointly titled account

Post by Gill » Sat Jan 13, 2018 10:49 am

RudyS wrote:
Sat Jan 13, 2018 10:35 am
Gill wrote:
Sat Jan 13, 2018 7:46 am
The surviving spouse would own the account outright and therefore a full step up at the subsequent death.
Gill
And, this may be obvious, the account should then be retitled to just the surviving spouse.
But if this was never done, no harm, no foul.
Gill

Post Reply