Originally Posted by Katoslake
My wife is co-owner on an investment account with her mother.
They thought it would make things easier and more accessible, but we are now wondering about the tax implications.
The accounts were originated by her mother and my wife was added instead of getting power of attorney access.
Taxable account worth $400,000. Mostly CD’s and MM.
How is tax liability divided in this situation ?
Thanks as always for your comments !
Usually there is a single TIN or SS# associated with the account and 1099s are issued to the owner of that TIN or SS# and they are responsible for reporting and any taxes.
In the case that you describe, typically the interest would be reported to the IRS in your DMIL's name and she would report the interest on her tax return. Assuming that is the case, no tax implications for your DW.
The one downside of having co-owners is that technically, if your wife were sued then your DMIL's account could be at risk, but that is what umbrella insurance is for.