POD or TOD accounts and inheritance tax

[____]

POD/TOD accounts goes directly to the beneficiary upon the account owner's death. If that considered a gift or inheritance to the recipient? If a state like NJ has an inheritance tax, is that transfer taxable to the recipient? I assume if it is considered a gift, it would not be taxable to the recipient?

Separately, is the POD/TOD account part of the deceased's estate for unified gift/estate tax computation?

TIA

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[Stuart O. Bronstein]

<obi1...@gmail.com> wrote:

> POD/TOD accounts goes directly to the beneficiary upon the account
> owner's death. If that considered a gift or inheritance to the
> recipient?

Generally, yes.

> If a state like NJ has an inheritance tax, is that
> transfer taxable to the recipient?

If it's an estate tax and the transfer is taxable, it's taxable to
the estate. If it's an inheritance tax it will be taxable to the
heir.

> I assume if it is considered a
> gift, it would not be taxable to the recipient?

There is generally no income tax to the recipient, unless the gift
comes from an IRA, 401(k) or other type of qualified plan.

> Separately, is the POD/TOD account part of the deceased's estate
> for unified gift/estate tax computation?

Normally, yes.

--
Stu
http://DownToEarthLawyer.com

[____]

On Tuesday, May 24, 2022 at 2:43:14 PM UTC-4, Stuart O. Bronstein wrote:
> <obi1...@gmail.com> wrote:
>
> > POD/TOD accounts goes directly to the beneficiary upon the account
> > owner's death. If that considered a gift or inheritance to the
> > recipient?

> Generally, yes.

It is not clear to me. Is the POD considered a gift OR an inheritance?

> > If a state like NJ has an inheritance tax, is that
> > transfer taxable to the recipient?

> If it's an estate tax and the transfer is taxable, it's taxable to
> the estate. If it's an inheritance tax it will be taxable to the
> heir.

The decedent is in a state with estate tax; and the POD recipient is in a state with an inheritance tax (e.g. NY and NJ). The recipient is not a relative of the decedent. I assume since POD transfer occurs after a person died, then the transfer is an inheritance to a NJ recipient? Then the question is: does the NJ inheritance tax apply to an inheritance coming from outside of NJ?

[ira smilovitz]

>From the instructions for NJ Form IT-R:

2. The transfer of intangible personal property such as stocks,
bonds, corporate securities, bank deposits and mortgages
owned by a nonresident decedent is not subject to the New
Jersey Inheritance Tax.

Ira Smilovitz, EA
Leonia, NJ

[Stuart O. Bronstein]

____ <obi1...@gmail.com> wrote:
>> > POD/TOD accounts goes directly to the beneficiary upon the
>> > account owner's death. If that considered a gift or inheritance
>> > to the recipient?
>
>> Generally, yes.
>
> It is not clear to me. Is the POD considered a gift OR an
> inheritance?

If it's not paid until the death of the donor, it's an inheritance.