Property which is owned in joint tenancy with right of survivorship passes automatically to the surviving joint tenant. It does not pass under the will. This type of ownership is in contrast to property owned as tenants in common. A decedent’s interest in property owned as a tenant in common does not pass automatically to the surviving tenant or tenants but rather is subject to disposition under the decedent’s will.
Property which is owned in joint tenancy is also included in the gross estate, at least to the extent of decedent’s ownership in the joint tenancy property. Excluded from the gross estate is the part of the jointly held property which is shown to have originally belonged to the other joint tenant and never to have been received or acquired by the other joint tenant from the decedent for less than adequate and full consideration.
If the property or part of the property has been acquired by the other joint tenant from the decedent, then the value does not include, in the estate, the amount that is proportionate to the consideration given by the other joint tenant. If the property was acquired by gift, bequest, devise, or inheritance, as a tenancy by the entirety or as joint tenants by the decedent and spouse, then one-half is included in the estate of the first spouse to die.
If property is acquired by gift, bequest, devise, or an inheritance by the decedent and a non-spouse as joint tenants with right of survivorship, then the value included is calculated by dividing the value by the number of joint tenants, with right of survivorship, and that fractional part is included in the estate, unless the interests are otherwise fixed by law.
A qualified joint interest is any interest in property held by the decedent and the decedent’s spouse as tenants by the entirety or joint tenants with right of survivorship, but only if the decedent and the spouse are the only joint tenants. When spouses own a qualified joint interest, then one-half of the value of the qualified joint interest property is included in the first estate. Unless sold or otherwise disposed of by the surviving spouse prior to his or her death, the value of all the joint property is included in the surviving spouse’s estate.
EXAMPLE 1:
■ Grandmother has $100,000 in a bank account. She changes the form of ownership so the account
is owned in joint tenancy with grandmother, her son, and her daughter.
■ Assume son dies. No part of the joint tenancy property will be included in the son’s estate for
federal estate tax purposes (because he provided no consideration).
■ Assume grandmother dies. 100% of the value of the joint tenancy property will be included in
grandmother’s estate for federal estate tax purposes because she provided 100% of the
consideration.
EXAMPLE 2:
■ Wife earns $150,000 which she transfers to a brokerage account in her own name. Later she
transfers the brokerage account into joint tenancy with her husband. Wife and husband are the
only two joint tenants.
■ Husband dies. The ownership interest of the husband is a qualified joint interest. Accordingly,
one-half of the value of the property will be included for federal estate tax purposes in the
husband’s estate.
