REWahoo
Give me a museum and I'll fill it. (Picasso) Give
OK all you would-be tax experts, here’s a question for you:
A few years ago, my friends FIL told his daughter (my friends spouse) he wanted to “put her name” on one of his savings accounts so she could get to some of his savings if he got ill and needed money for medical treatment. His FIL is a widower, in his 80’s and lives alone. He has two children, a son who lives 1,500 miles away and visits once a year, and his daughter, 150 miles away who visits at least once a month.
My friend told his spouse that he was concerned about the tax consequences of her being a joint owner of an account for both her and her dad. He was also concerned about the tax and estate issues once his FIL passed away. Last but not least, he was concerned that it might cause friction between his wife and his BIL when and if his BIL became aware of what FIL had done.
My friend suggested to his spouse and his FIL they look into some sort of power of attorney for medical needs, but the FIL was not comfortable with that idea. The compromise was to open a small CD in both the dad and daughter’s name. The account read “Mr. FIL or Mrs. Daughter”. My friend wasn’t comfortable with the idea, but his FIL is one of those old guys that decides what he wants to do and does it, regardless of the consequences. My friend said he tried to forget about it and hoped they wouldn't get a letter from the IRS.
Fast forward 3 or 4 years. My friend discovers that FIL has been adding money to the account without his or his wifes knowledge and it now totals a couple of hundred thousand dollars! He discovers this when they are visiting and her dad gives her the latest bank statement and asks her to contact the bank and have them send him a check for $100K from the account when the $200K CD matures at the end of the month.
The daughter has never withdrawn any money from the account or had any interaction with the bank regarding the account since signing the papers opening the account years ago. The mailing address for the account is and always has been her fathers address.
My friend thinks I’m a financial wizard (you retired early didn’t you?) and asked me what he should do. I said “Let me think about it and I’ll get back to you.”
What’s the tax liability for my friend and his spouse, if any? What should they do?
Make me look good...
A few years ago, my friends FIL told his daughter (my friends spouse) he wanted to “put her name” on one of his savings accounts so she could get to some of his savings if he got ill and needed money for medical treatment. His FIL is a widower, in his 80’s and lives alone. He has two children, a son who lives 1,500 miles away and visits once a year, and his daughter, 150 miles away who visits at least once a month.
My friend told his spouse that he was concerned about the tax consequences of her being a joint owner of an account for both her and her dad. He was also concerned about the tax and estate issues once his FIL passed away. Last but not least, he was concerned that it might cause friction between his wife and his BIL when and if his BIL became aware of what FIL had done.
My friend suggested to his spouse and his FIL they look into some sort of power of attorney for medical needs, but the FIL was not comfortable with that idea. The compromise was to open a small CD in both the dad and daughter’s name. The account read “Mr. FIL or Mrs. Daughter”. My friend wasn’t comfortable with the idea, but his FIL is one of those old guys that decides what he wants to do and does it, regardless of the consequences. My friend said he tried to forget about it and hoped they wouldn't get a letter from the IRS.
Fast forward 3 or 4 years. My friend discovers that FIL has been adding money to the account without his or his wifes knowledge and it now totals a couple of hundred thousand dollars! He discovers this when they are visiting and her dad gives her the latest bank statement and asks her to contact the bank and have them send him a check for $100K from the account when the $200K CD matures at the end of the month.
The daughter has never withdrawn any money from the account or had any interaction with the bank regarding the account since signing the papers opening the account years ago. The mailing address for the account is and always has been her fathers address.
My friend thinks I’m a financial wizard (you retired early didn’t you?) and asked me what he should do. I said “Let me think about it and I’ll get back to you.”

What’s the tax liability for my friend and his spouse, if any? What should they do?
Make me look good...