My father recently passed away and left an account for a sibling and myself as a pod. I didn't think an account of this would be taxable.
Insurance Law Lawyer
Generally, the beneficiary of a POD account inherits the account free of federal income taxes. Nevertheless, income earned while the decedent was alive is reported on the decedent's final tax return. This is really a tax question. Please see disclaimer below.
The foregoing is a general answer based upon limited information, should not be construed as legal advice , and does not create an attorney-client relationship. It is the opinion of the writer alone. The author is licensed in Indiana and Ohio attorney only.
A payable on death bank account, originally referred to as "Totten Trust" accounts, are includable in the estate of the decedent. Therefore if the estate is subject to federal estate tax, then this account would be included. It is also subject to state estate tax and possibly stay inheritance tax. In New Jersey there would be no transfer inheritance tax from parent to child, yet depending on the size of the estate, if it were greater than $675,000, there could be state estate tax.
I know this is confusing, that is why you need to speak to a tax and estate attorney in your area.
I hope this helps!
If you do not like this answer or disagree, please look at one of the other answers provided. It is not necessary for you to try prove this answer is "wrong" or something with which you do not agree. This is a free service for you based on limited facts. Nevertheless, many times you need to consult an attorney with the details to get actual advice specific to your concerns. Do not put too many details in your questions or comments because this makes the information public and could hurt you. Government Regulations contained in IRS Circular 230 regulate written communications about Federal tax matters, including e-mail, between us and our clients. This is another attempt by the government to limit your rights and to extend the control of government over individuals and businesses. Nevertheless, such communications are either opinions or other written communications. This is not an opinion. It is other written communication and was not written to be relied upon, by itself, to avoid any tax penalties. In order to receive assurances of protection from tax penalties from a written communication, you should get an opinion letter. If you would like to discuss an opinion letter relating to any matter, please contact me and I will explain what is involved and what it will cost.
Estate Planning Attorney
There are two types of tax: Income tax and estate tax.
First, estate tax, Ohio and Federal: If your father died in 2013, there is no Ohio estate tax. If he died in 2012, all assets greater than $338,333 passing at his death (except life insurance) are subject to the Ohio estate tax, which is about 7%. If his estate is greater than $5 million, there may be federal estate tax. If less than that, there is none.
Second, income tax: Unless the account is a deferred income account like an annuity or IRA, there is no income tax to the inheritors. If it is a simple bank account--checking, savings or money market--there is no income tax to the POD recipients.
Mr. Huddleston is an Ohio-Certified Specialist in Estate Planning, Trust & Probate Law, with offices in Columbus and Dayton, serving client families and private business owners throughout Ohio. He may be contacted directly by phone toll-free at 888.488.7878 or by email CLH@HUDDLAW.COM. Mr. Huddleston responds to Avvo questions as a public service to help educate and provide general guidance to questioners, but his responses are not legal advice and do not create an attorney-client relationship.