Follow up on joint tenancy and gifts

[Kram BergGold]

I found it strange that adding a name to some stock shares gets a different treatment than adding a name to a brokerage account. Why is this?

[Bees Knees]

I didn’t know the answer either. Then I used my 2006 WebCD and clicked on the Joint Tenancy heading from page 21-24 in TTB book and it linked me to page 4 of the Form 709 instructions, which says:

Joint Tenancy
If you buy property with your own funds
and the title to such property is held by
yourself and the donee as joint tenants
with right of survivorship and if either you
or the donee may give up those rights by
severing your interest, you have made a
gift to the donee in the amount of half the
value of the property.
If you create a joint bank account for
yourself and the donee (or a similar kind
of ownership by which you can get back
the entire fund without the donee’s
consent), you have made a gift to the
donee when the donee draws on the
account for his or her own benefit.

So in other words, when you buy and sell stocks in a brokerage account, either the donee or the donor can access the account and sell stocks and take the cash without the other’s consent. The donor in essence can take back the gift at anytime without the donee’s consent, so it cannot be a completed gift until the donee actually exercises his or her right to the money by withdrawing funds from the account.

Whereas if the donor puts the donee’s name on an individual stock, the stock cannot be cashed in by either party without the other’s consent. It is a completed gift since the donor needs the donee’s permission to take back the gift.

[Gretel]

Bees, thank you so much for this down to earth explanation. You are a genius, at least when it comes to translating the code for normal people.