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Ask the Expert: Inheriting mother’s stocks

My mother and my late father owned stocks jointly with right of survivorship (JTWROS). My mom now wants me named on them. Is it better for us to own them JTWROS, or to add me as the beneficiary (POD)? What are the tax consequences of owning them JTWROS? Would I have to claim half the stock dividend interest on my tax return?

You’ll inherit the stocks whether you’re listed as beneficiary or as joint owner. As beneficiary, you’d have no access to them during your mom’s lifetime. As joint owner, you’d have the same access and control she does. A third option is for her to keep them in her name, add you as beneficiary, and give you her power of attorney to do account transactions on her behalf. (The broker can supply the power of attorney form.)

Even if you’re joint owners, she’d be the primary person on the account. Only her name and Social Security number would be on Form 1099, which reports interest and dividends to the IRS. But Form 1099 doesn’t determine who owes the taxes. That depends on her intention in making you a joint owner. If she just wants you to use the account for her benefit during her lifetime, she’s solely responsible for the taxes. If she wants to give you half the account, you’re responsible for half the tax.

In that case, tax professionals say she should report the full 1099 amount on her return and then subtract half, listing you by name and Social Security number as joint owner. For example: “ABC account interest $4,000, minus $2,000 to be reported by joint owner Mary Smith, Social Security # 123-456-7899.” And you should declare that $2,000 on your return.

THE BOTTOM LINE Form 1099 only lists one owner even on joint accounts.



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