We are mother and daughter. I have power of attorney and have checks deposited it joint accounts. Is this the best arrangement
to manage our finances as we combine incomes?
Estate Planning Attorney
If assets are held in a joint account with rights of survivorship , one half will be taxed if either you or your mother pass away. The tax rate is 4.5%. A better solution might be for her to have an account with you as the agent under a power of attorney. That way, you can act on her behalf to manage matters but your assets would not be commingled with hers and would not be taxed at her death. Also, you must both be careful of how your wills treat these accounts for tax purposes. Some wills have a tax clause that imposes this inheritance tax on the survivor recipient. Other will tax clauses would have this tax paid from the state. There is no right or wrong answer but the best thing is to consider all of the pros and cons, be clear on your goals, and to set the accounts up so that the result that is desired is clear if either of you pass away.
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As long as the account was established over a year before death, only one-half will be subject to PA Inheritance Taxes (PIT) at a 4 1/2% rate, so your half will not be taxes.
As to your second question concerning management, this seems to be a good way of managing your joint funds. However, if something happens to you and your mom is no longer competent, this could raise problems. Be sure to look at the power of attorney to see who is your successor power of attorney to make sure that person would be a good choice if you are not available.
Finally, remember that if you add joint tenants to the account you could reduce the amount of assets subject to tax. For example, if you had a husband and two children who are going to share in the estate and you add them as joint tenants then only 1/5 of the account would be subject to PIT. However, the situation and your mom's donative intent must match such a tax strategy. Also, you need to make sure she is not subject to Federal Estate Taxes and that the sole tax issue is PIT.
Hope this helps.
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