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TOD Joint Brokerage Account to Spouse
Old 02-28-2018, 04:05 PM   #1
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TOD Joint Brokerage Account to Spouse

Here is a situation for consideration by tax experts. Come to think of it, some here have probably gone through this type of event.

Husband and Wife own a brokerage account. The account is titled:
The 1099 bears HUSBAND & WIFE names, and only HUSBAND SSN.

HUSBAND dies, and the institution is re-titling the brokerage account in WIFE's name, with her SSN.

What is the tax effect of this re-titling? For example, is there a step-up in basis? Anything else?

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Old 02-28-2018, 04:17 PM   #2
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Depends on where she lives. If in a community property state such as CA, then the surviving spouse gets a step up in basis on 100% of the account. In other states, it's 50%. There shouldn't be any immediate tax consequences either way, but when she sells assets she needs to know on what date they were valued and use the correct basis. She should also make sure the broker records the basis correctly so it will be reported to the IRS properly upon the sale.

I don't think the wife can be named as both the joint tenant (owner of 50% of the account) and the TOD beneficiary though. That doesn't really make sense to me because if she already owns the assets, they don't need to be transferred to her.

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Old 03-26-2018, 05:36 AM   #3
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Forgot to follow up with a thank you. We are in a 50/50 state. Institution will do a 50% step up.

The account was titled exactly as mentioned. Others we've gone to for advice have also mentioned that JTWROS and TOD seems odd. However, that is how it was done. There are several children involved.

We are now three months out and still dealing with paperwork, etc., to get the titling correct on all accounts (IRA, Brokerage, Managed account).

Checking was easy compared to the others, since my spouse had name on the account.

Executrix has mis-communicated several things, but eventually we will get things correct.

Needless to say, this has been a real eye-opener for us. Many things learned along the way.
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Old 03-26-2018, 08:12 AM   #4
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Also, be aware that any stocks that have gone down since they were purchased get their basis stepped down.
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Old 04-17-2018, 06:30 AM   #5
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Originally Posted by FIRE'd@51 View Post
Also, be aware that any stocks that have gone down since they were purchased get their basis stepped down.
Thank you for that note. It is helpful to know as we wait for the taxable brokerage to move through the institution's paperwork process. It has been an interesting process to watch. Evidently some companies have a not-so-simple work flow, lengthening the time to complete.

A new twist is that the beneficiary spousal IRA that passed from Husband to Wife did not make it into the managed account. While Husband was alive, the IRA was under management, including sending the RMD. Oh well, there will be less fees for the company.

I've been reading about RMDs, and how to calculate the next year's RMD. I'm relying on this table:

Seems simple enough.
1) I confirmed that 2017 RMD was exactly the E-O-Y IRA 2016 balance divided by 13.4 (husband was 87 in 2017).
2) Since husband was 3 years younger, it makes sense to "Distribute based on owner’s age using Table I". Ref:
3) In subsequent years, "Reduce beginning life expectancy by 1 for each subsequent year". Ref: same as in 2). I take this to mean that the 2018 RMD would use a factor of 12.4.

Does my analysis of this look correct? I'm aware of the numerous calculators on the internet that are available, but would like to understand this strictly based on the IRS guidance and documents.
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