Gift tax concern? Joint bank account with parent & inheritance transfer after death

The joint account situation is quite common, but it does raise some important tax considerations. Let me walk through your questions one by one. For your first question about the Pour-over Provision: This likely doesn't come into play for the joint account. Pour-over provisions direct assets that weren't transferred to the trust during the person's lifetime to "pour over" into the trust after death. However, joint accounts with rights of survivorship typically pass outside of both the will and trust directly to the surviving owner. Regarding your main question: When your sister writes you a check for half the account balance, this could potentially be considered a gift. The reason is that legally, as a joint account holder, your sister becomes the sole owner of the entire account balance upon your mother's death through the right of survivorship. The money is legally hers at that point. When she then gives you half, the IRS may view this as a gift from her to you. If there's documentation showing this was your mother's intention (like instructions in her will or trust about dividing the account), your sister might argue this was fulfilling your mother's wishes rather than making a gift. However, since the account passes outside the will/trust, this argument may not be convincing to the IRS. For your hypothetical about the gold coin: If the coin was part of the estate and properly distributed through probate or a trust, the division of proceeds wouldn't be a gift - it would be part of inheritance distribution. However, if one child inherited the coin outright and then chose to share the proceeds, that could potentially be viewed as a gift.

I ran into a similar situation with my dad's accounts last year. The whole joint account thing can get messy. I ended up using https://taxr.ai to analyze our specific situation and it saved me so much confusion. They looked at our documents (trust, account statements, etc.) and provided a customized analysis showing exactly what would and wouldn't be considered a gift in our case. For your specific situation, they explained that accounts with rights of survivorship do technically become the full property of the survivor, which is why your sister giving you half could trigger gift tax issues. Their tool highlighted that POD (payable on death) designations would avoid this problem entirely. The gold coin scenario was interesting too - they showed me how the difference between inheriting something jointly vs. one person inheriting and then sharing changes the tax treatment completely.

I actually tried taxr.ai after seeing it mentioned here and it was a game-changer for our family trust situation. I was skeptical at first, but we were dealing with a complicated situation with multiple accounts, some joint, some in trust. The analysis showed that two of our planned transfers would have triggered gift tax reporting requirements without us realizing it. They recommended simple changes to our account structure that prevented any gift tax issues. The best part was getting clear explanations about WHY certain transfers count as gifts while others don't - it made the whole thing make sense for the first time. Their guidance on how trusts interact with joint accounts was especially helpful. Turns out the pour-over will provision doesn't help with joint accounts like I thought it would. This probably saved us thousands in potential tax issues!

I had a nightmare trying to get through to the IRS about a similar inherited account situation. Kept getting put on hold for hours then disconnected. Finally tried https://claimyr.com after someone on this sub recommended it. Their service got me through to an actual IRS agent in about 15 minutes when I'd been trying for days on my own. You can actually see how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent confirmed that when accounts pass by right of survivorship, they become 100% the property of the surviving owner, and any subsequent transfers are treated as gifts for tax purposes. They recommended using either POD designations or putting the account in the trust to avoid this issue completely. For what it's worth, the agent also mentioned that many families handle these situations informally without issues, but technically the transfers could be questioned if they exceed the annual gift exclusion.

I owe everyone an apology. After being super skeptical about Claimyr, I actually tried it for a complicated gift tax question related to my parents' estate. I had spent THREE DAYS trying to reach the IRS myself with no luck. Used the service and got a call back in about 20 minutes connecting me to an actual IRS representative. The rep walked me through exactly how the right of survivorship works with joint accounts and confirmed that yes, these subsequent transfers can be treated as gifts if they exceed the annual exclusion. She suggested documenting the original intent with a letter from my mother stating her wishes for the account to be divided, which might help if there were ever questions. Not a guarantee, but better than nothing. Still can't believe I got through after wasting so many hours trying myself.

Have you considered just adding yourself as another joint owner on the account now? If all three of you are joint owners, then when your mom passes, the account would automatically belong to both you and your sister equally. No need for her to "gift" you anything.

Has anyone used TurboTax to file gift tax returns? I had to file one last year when I helped my son with a house down payment, and I found the interface for Form 709 really confusing.

This is a really complex situation that highlights why estate planning can be so tricky! Based on what others have shared here, it sounds like the joint account structure might indeed create gift tax complications when your sister transfers half to you after your mom passes. I went through something similar with my grandmother's accounts a couple years ago. What we learned (the hard way) is that joint accounts with rights of survivorship really do become 100% the property of the surviving owner, regardless of what anyone's intentions were. The IRS doesn't care about family understandings - they look at legal ownership. A few thoughts based on our experience: 1. The POD/TOD beneficiary approach that others mentioned is definitely cleaner. Your sister stays in control during your mom's lifetime, but the account automatically splits according to the beneficiary percentages when she passes. 2. If you do stick with the current joint account setup, definitely document your mom's intentions in writing. Have her write a letter stating she wants the account split equally between you and your sister. It won't eliminate the potential gift tax issue, but it might help if questions arise. 3. Consider the annual gift exclusion timing. If your sister needs to give you more than $18k, she could potentially split it across tax years to minimize the gift tax return requirements. 4. Don't forget about the lifetime gift tax exemption. Even if your sister has to file Form 709, she likely won't owe actual gift tax unless she's already used up her $13+ million lifetime exemption. The Medicaid lookback period concern someone raised is also really important if that's a possibility for your mom's future care needs.

This thread has been incredibly helpful! I'm dealing with a similar situation with my father's accounts and the gift tax implications have been keeping me up at night. One thing I wanted to add based on my recent research - the IRS Publication 950 (Introduction to Estate and Gift Taxes) has some specific guidance on joint accounts that might be relevant here. It mentions that when joint account holders contribute different amounts to the account, the tax treatment can get complicated. In your case, since your mom funded the entire account and your sister never contributed her own money, there might be an argument that your sister's "ownership" is really just administrative. However, as others have pointed out, the legal right of survivorship still applies regardless of who contributed what. I'm curious - has anyone here actually been audited on a joint account transfer like this? I keep reading about the theoretical tax implications, but I wonder how often the IRS actually pursues these cases in practice, especially for amounts under $100k. Also, @Mohammed Khan, you mentioned your mom has most assets in the trust already. Have you considered just moving this checking account into the trust as well? I know you wanted to keep it separate for bill-paying convenience, but many banks now offer online trust account management that makes it almost as easy as a regular checking account. That would completely eliminate the gift tax question since distributions would be governed by the trust terms rather than joint ownership rules.