Joint Accounts Don’t Count Towards Bequests

Robert created a trust that first distributed the first $2 million to his wife, Linda before making $500,000 bequests to each of his two daughters, Tina and Louise. When Robert created his trust, he considered the bequest to his wife to be enough for her to live off of the rest of her life, also considering that she had other assets of her own in her own trust. He didn’t want Tina and Louise to wait until both his and Linda’s deaths before enjoying any of their inheritance, and that is why he included those bequests.

When Robert died, his trust had less than $2 million of assets in it. Robert had more than $1 million of other assets, both those were all held jointly with rights of survivorship with Linda. They were not ever funded into Robert’s trust.

So Linda took the joint assets as her own. When Robert’s trust was administered, the entire balance also went to Linda. Tina and Louise received nothing from Robert’s estate.

And this is the important point that I wish to make today. Robert may have considered the joint account to count towards what he wanted to leave Linda from his estate. But Robert didn’t direct his attorney to draft language into his trust indicating that was his intent. Maybe Robert assumed that the joint account gift would serve to satisfy part of what he intended to leave Linda through his will and trust.

But that isn’t the case.

Maybe Robert intended to fund the joint account into his trust account to satisfy his intent. Transferring a joint account into a single trust generally requires both joint account owners’ signatures. Perhaps upon discovering this, Robert decided not to do it and didn’t believe it necessary to alter the terms of his trust.

Upon discovering what was to occur in Robert’s estate administration, Tina and Louise wondered if anything could be done to rectify the situation. The answer is not unless Linda wants to cooperate.  Linda could, for example, file a legal disclaimer for some portion or all the $1 million in bequests that Tina and Louise didn’t receive. A legal disclaimer must be signed in accordance with Florida law and with the Internal Revenue Code. There are several requirements that must be satisfied to file a disclaimer.

Linda could also cooperate if she simply gifted some of her inheritance to Tina and Louise. The gift would be taxable, as it would be above the $15,000 annual exclusion limitation, which only means that the gift would reduce Linda’s current $11.2 million federal estate tax exemption. Provided Linda’s taxable estate at the time of her passing is below the then available federal exemption, the gift would not affect her. If, on the other hand, Linda’s estate could be in danger of exceeding the limitation, she has the option of filing a Federal Estate Tax Return Form 706 on Robert’s estate to transfer any of his unused exemption to her own estate negating the gift transfer.

Depending upon the assets that Linda transfers, and whether they came from the joint account or from assets she inherited from Robert, there could be unrealized capital gain that may one day be realized by Tina and Louise that would require the payment of capital gains taxes. This is because joint account assets do not receive a full step up in tax cost basis upon one of the account holder’s deaths.

Linda may also choose not to cooperate, leaving Tina and Louise with no inheritance. Much of this depends upon the relationship between the parties as well as Linda’s comfort as to whether she has sufficient funds to live off of the remainder of her lifetime.

As you can see, an assumption on Robert’s part could lead to some very real problems between his loved ones. If you have questions as to whether certain accounts will serve to satisfy bequests you have in your will or trust, be sure and discuss your questions with your estate planning attorney.


©2021 Craig R. Hersch .Learn more at

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