Joint accounts don't automatically transfer to survivor (in NJ)?

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w5000
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Joint accounts don't automatically transfer to survivor (in NJ)?

Post by w5000 »

I always thought that a joint account, for example a checking account at a bank that was registered as "joint tenants with right of survivorship" (JTWROS), would automatically transfer to the survivor when the other joint owner dies. So all you'd have to do is send the bank a death certificate, and they should remove the deceased from the account. Easy peasy.

But this hasn't been my experience helping my mom with all the financial affairs after my father passed away earlier this year.

Maybe it has something to do with the fact that my parents were residents of NJ which has an inheritance tax. With at least one institution, we had to fill out a L-8, get it notarized, and send it to them. The L-8 form is basically an affidavit that affirms my mom, as the spouse of the deceased, is an eligible beneficiary and therefore isn't subject to the inheritance tax. This form is evidently required for release of bank accounts, brokerage accounts, etc.

Here's what I don't get -- ownership by JTWROS should mean that the account/asset passes directly to the surviving owner. Therefore, it is not a part of the deceased's estate. And therefore the surviving owner does not actually inherit it, so the NJ inheritance tax shouldn't be relevant (and we shouldn't have to fill out these L-8 forms and get them notarized).

Is there something that I'm misunderstanding about this?
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Re: Joint accounts don't automatically transfer to survivor (in NJ)?

Post by Gill »

You’re right about the law governing JTWROS but the NJ taxing authorities still have an interest in collecting a tax on that transfer.
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Jags4186
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Re: Joint accounts don't automatically transfer to survivor (in NJ)?

Post by Jags4186 »

w5000 wrote: Wed Nov 30, 2022 8:16 am I always thought that a joint account, for example a checking account at a bank that was registered as "joint tenants with right of survivorship" (JTWROS), would automatically transfer to the survivor when the other joint owner dies. So all you'd have to do is send the bank a death certificate, and they should remove the deceased from the account. Easy peasy.

But this hasn't been my experience helping my mom with all the financial affairs after my father passed away earlier this year.

Maybe it has something to do with the fact that my parents were residents of NJ which has an inheritance tax. With at least one institution, we had to fill out a L-8, get it notarized, and send it to them. The L-8 form is basically an affidavit that affirms my mom, as the spouse of the deceased, is an eligible beneficiary and therefore isn't subject to the inheritance tax. This form is evidently required for release of bank accounts, brokerage accounts, etc.

Here's what I don't get -- ownership by JTWROS should mean that the account/asset passes directly to the surviving owner. Therefore, it is not a part of the deceased's estate. And therefore the surviving owner does not actually inherit it, so the NJ inheritance tax shouldn't be relevant (and we shouldn't have to fill out these L-8 forms and get them notarized).

Is there something that I'm misunderstanding about this?
You don’t think the State of NJ is just going to let anyone with a JTWROS account bypass inheritance tax, do you? Otherwise everyone would be adding their heirs to these accounts on their deathbed.
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Re: Joint accounts don't automatically transfer to survivor (in NJ)?

Post by retiringwhen »

Jags4186 wrote: Wed Nov 30, 2022 8:24 am You don’t think the State of NJ is just going to let anyone with a JTWROS account bypass inheritance tax, do you? Otherwise everyone would be adding their heirs to these accounts on their deathbed.
Exactly, Any non-spouse, non-descendant is subject to inheritance tax, so NJ is looking to ensure it is not bypassed via backdoors.

It is one reason some older NJ couples who never married, actually get married.
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Re: Joint accounts don't automatically transfer to survivor (in NJ)?

Post by tfalk »

About to go down this same street with NJ... do not be surprised if in addition to requiring the L8, the bank
'withholds' 50% of the account value...

"In New Jersey, banks will freeze 50% of the bank account upon the death of the owner of the account. This is New Jersey’s way of assuring that any estate or inheritance tax that might be due gets paid. To lift the freeze, you must obtain a waiver. The executor/personal representative may only need to complete an L-8 waiver form for estates less than $675,000 with only Class A beneficiaries. Otherwise, you must file the estate and/or inheritance tax return, pay any tax due, and at that time the New Jersey Division of Taxation will issue you a waiver."
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Re: Joint accounts don't automatically transfer to survivor (in NJ)?

Post by cas »

w5000 wrote: Wed Nov 30, 2022 8:16 am Here's what I don't get -- ownership by JTWROS should mean that the account/asset passes directly to the surviving owner. Therefore, it is not a part of the deceased's estate.
I think you might be conflating the concepts of "probate estate" and "taxable estate".

The "passes directly to the surviving owner" part means that it doesn't have to go through probate procedures before the surviving owner gets it. It isn't part of the "probate estate."

But state and federal law can still make it part of the "taxable estate" and impose various procedures and form filing to make sure they get paid any estate/inheritance tax they are owed.

All the above is written by a non-lawyer and is in lay terms. The lawyers may object to the phrasing.
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Re: Joint accounts don't automatically transfer to survivor (in NJ)?

Post by Lee_WSP »

Well, yes, I object to the framing as the language is incorrect.

An estate is actually everything you own or have an interest in while alive. Not just when you are dead. The taxable estate is the portion of your estate that the taxing statutes includes as countable. (I’m as of yet unaware of anything which is actually excluded, but for practical reasons, some things just aren’t counted as the value is negligible). Or it is also used to denote that which is subject to an estate tax or inheritance tax.

Here’s the definition by Wex:
An estate is the total property; real and personal, owned by an individual prior to distribution through a trust or will

And Black’s:
The interest which any one has in lands, or in any other subject ofproperty

A probate estate doesn’t have a formal definition, but most people understand it to mean that portion of the estate which must go through some court ordered procedure. It has no formal meaning because probate means to prove the will and people wouldn’t agree that “probate estate” only includes such property that passes through a will. I digress on this topic.

OP,
Sure sounds like it did pass via operation of law, but the taxing authorities have put a hold on the transfer.
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Re: Joint accounts don't automatically transfer to survivor (in NJ)?

Post by talzara »

w5000 wrote: Wed Nov 30, 2022 8:16 am Here's what I don't get -- ownership by JTWROS should mean that the account/asset passes directly to the surviving owner. Therefore, it is not a part of the deceased's estate. And therefore the surviving owner does not actually inherit it, so the NJ inheritance tax shouldn't be relevant (and we shouldn't have to fill out these L-8 forms and get them notarized).
JTWROS only avoids probate. It does not remove the assets from the estate.

Other states also include JTWROS property in the estate, not just New Jersey. The federal government also includes JTWROS property in the estate. It's reported on Schedule E of the federal estate tax return:
Enter on this schedule all property of whatever kind or character, whether real estate, personal property, or bank accounts, in which the decedent held at the time of death an interest either as a joint tenant with right to survivorship or as a tenant by the entirety.

https://www.irs.gov/pub/irs-pdf/f706.pdf
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Re: Joint accounts don't automatically transfer to survivor (in NJ)?

Post by Makefile »

Lee_WSP wrote: Wed Nov 30, 2022 2:12 pm An estate is actually everything you own or have an interest in while alive. Not just when you are dead. The taxable estate is the portion of your estate that the taxing statutes includes as countable. (I’m as of yet unaware of anything which is actually excluded, but for practical reasons, some things just aren’t counted as the value is negligible). Or it is also used to denote that which is subject to an estate tax or inheritance tax.
Also--bankruptcy estate, right?
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Re: Joint accounts don't automatically transfer to survivor (in NJ)?

Post by Lee_WSP »

Makefile wrote: Wed Nov 30, 2022 4:22 pm
Lee_WSP wrote: Wed Nov 30, 2022 2:12 pm An estate is actually everything you own or have an interest in while alive. Not just when you are dead. The taxable estate is the portion of your estate that the taxing statutes includes as countable. (I’m as of yet unaware of anything which is actually excluded, but for practical reasons, some things just aren’t counted as the value is negligible). Or it is also used to denote that which is subject to an estate tax or inheritance tax.
Also--bankruptcy estate, right?
Yes. I think the bankruptcy part denotes the estate minus exempt assets.

Estate is used as its intended in conservator ship proceedings for the curious.
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w5000
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Re: Joint accounts don't automatically transfer to survivor (in NJ)?

Post by w5000 »

Thanks for all the replies. I see I had an incorrect understanding of "inheritance" (as it applies to NJ's inheritance tax) which I took to mean being given ownership through probate. Also interesting to learn that one's "estate" does not exclude assets transferred by JTWROS or by beneficiary designation.
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Re: Joint accounts don't automatically transfer to survivor (in NJ)?

Post by TSR »

For me (as a lawyer, but one who does not do estate work), it seems very interesting that your mom as JTWROS would have complete access to and joint ownership of this account up to the moment of your dad's passing, at which point the state could step in and say, "We know this is your account, but for now you lose access to it until we say otherwise." Do they stop automatic payments from the account? What if that's the account that's paying for long-term care insurance? Could it be interrupted/lost for nonpayment just because someone didn't fill out all of the paperwork? I'm all for paying taxes that are due and reducing ways to avoid such taxes, but freezing an account based on a presumption that people will do fraudulent things with it seems a little extreme under the circumstances. I may be misreading the situation here.

Regardless, my condolences on your loss.
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Re: Joint accounts don't automatically transfer to survivor (in NJ)?

Post by retiringwhen »

TSR wrote: Thu Dec 01, 2022 8:30 am For me (as a lawyer, but one who does not do estate work), it seems very interesting that your mom as JTWROS would have complete access to and joint ownership of this account up to the moment of your dad's passing, at which point the state could step in and say, "We know this is your account, but for now you lose access to it until we say otherwise." Do they stop automatic payments from the account? What if that's the account that's paying for long-term care insurance? Could it be interrupted/lost for nonpayment just because someone didn't fill out all of the paperwork? I'm all for paying taxes that are due and reducing ways to avoid such taxes, but freezing an account based on a presumption that people will do fraudulent things with it seems a little extreme under the circumstances. I may be misreading the situation here.

Regardless, my condolences on your loss.
The advice from our estate planner (for NJ residents) is to keep most ready cash in personal (individual) accounts and not joint accounts because of the concern you raise. We do use a joint checking for day to payments, but the next 30-60 days cash sits in individual accounts and I regularly transfer the funds over.

The point about recurring payments you make is interesting and something I hadn't considered. I pay almost all the online/recurring payments via that joint checking account. It may be a good idea to setup alternate checking accounts that can be used and pre-authorize them with the normal payees like utilities, taxes, etc.
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Re: Joint accounts don't automatically transfer to survivor (in NJ)?

Post by bsteiner »

TSR wrote: Thu Dec 01, 2022 8:30 am For me (as a lawyer, but one who does not do estate work), it seems very interesting that your mom as JTWROS would have complete access to and joint ownership of this account up to the moment of your dad's passing, at which point the state could step in and say, "We know this is your account, but for now you lose access to it until we say otherwise." Do they stop automatic payments from the account? What if that's the account that's paying for long-term care insurance? Could it be interrupted/lost for nonpayment just because someone didn't fill out all of the paperwork? I'm all for paying taxes that are due and reducing ways to avoid such taxes, but freezing an account based on a presumption that people will do fraudulent things with it seems a little extreme under the circumstances. I may be misreading the situation here.

Regardless, my condolences on your loss.
New Jersey has a lien on the account for inheritance taxes. If the joint owner is a Class A beneficiary such as a spouse or a child, he/she need only give the bank an affidavit on Form L-8, https://www.state.nj.us/treasury/taxati ... e/itl8.pdf, and the bank can then release the entire account. Similarly, if it's an estate asset and all of the beneficiaries of the estate are Class A, the executor can give the bank that affidavit.
Without the Form L-8, the bank doesn't know that the joint owner is a Class A beneficiary, or that all of the beneficiaries of the estate are Class A.

If the joint owner isn't a Class A beneficiary, he/she may still withdraw 50% of the account pending receipt of a tax waiver from the New Jersey Division of Taxation. Similarly, if the account is an estate asset, and there are beneficiaries of the estate who aren't Class A, the executors may withdraw 50% of the account pending receipt of a tax waiver. The joint owner or the executors may change the investments within the remaining 50%, and can use the remaining 50% to pay the inheritance tax.
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Re: Joint accounts don't automatically transfer to survivor (in NJ)?

Post by TSR »

bsteiner wrote: Thu Dec 01, 2022 8:54 am If the joint owner isn't a Class A beneficiary, he/she may still withdraw 50% of the account pending receipt of a tax waiver from the New Jersey Division of Taxation. Similarly, if the account is an estate asset, and there are beneficiaries of the estate who aren't Class A, the executors may withdraw 50% of the account pending receipt of a tax waiver. The joint owner or the executors may change the investments within the remaining 50%, and can use the remaining 50% to pay the inheritance tax.
This was what I was assuming/hoping was included in the law. I appreciate your expert analysis.
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Re: Joint accounts don't automatically transfer to survivor (in NJ)?

Post by HomeStretch »

Even outside of NJ, a joint WROS account holder may have some paperwork to complete if the survivor is not primary on the account. For example, Fidelity requires the surviving CMA joint account holder to set up a new CMA if the survivor’s SS# is not primary on the account.
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Re: Joint accounts don't automatically transfer to survivor (in NJ)?

Post by w5000 »

TSR wrote: Thu Dec 01, 2022 8:30 am ...it seems very interesting that your mom as JTWROS would have complete access to and joint ownership of this account up to the moment of your dad's passing, at which point the state could step in and say, "We know this is your account, but for now you lose access to it until we say otherwise."
So far, no institution has frozen any account (or 50% of any account). And in practice, it's not at the point of the decedent's passing that this stuff could happen, but when you tell the bank that a joint owner has passed.

We started rearranging bank accounts for my mom (i.e. in the process of swapping out one bank for another), and so we actually transferred most of the funds out of some joint accounts after my father passed but before notifying the bank that he passed. In retrospect, perhaps this was a no-no but in the end it doesn't matter since as a spouse, she is not subject to the NJ inheritance tax.
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Re: Joint accounts don't automatically transfer to survivor (in NJ)?

Post by TSR »

w5000 wrote: Thu Dec 01, 2022 9:27 am
TSR wrote: Thu Dec 01, 2022 8:30 am ...it seems very interesting that your mom as JTWROS would have complete access to and joint ownership of this account up to the moment of your dad's passing, at which point the state could step in and say, "We know this is your account, but for now you lose access to it until we say otherwise."
So far, no institution has frozen any account (or 50% of any account). And in practice, it's not at the point of the decedent's passing that this stuff could happen, but when you tell the bank that a joint owner has passed.

We started rearranging bank accounts for my mom (i.e. in the process of swapping out one bank for another), and so we actually transferred most of the funds out of some joint accounts after my father passed but before notifying the bank that he passed. In retrospect, perhaps this was a no-no but in the end it doesn't matter since as a spouse, she is not subject to the NJ inheritance tax.
I'm glad you didn't have this problem. I think my concern was likely somewhat overstated, but I could imagine some worst-case scenarios where this could get complicated. As for your "no-no," I think that such things could end up as great evidence in a legitimate case of fraudulent conveyance, but where you were asserting a legitimate right to that money and actually not attempting to evade taxes, I assume all relevant authorities appreciate that things tend to move quickly around the time of someone's passing.
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Re: Joint accounts don't automatically transfer to survivor (in NJ)?

Post by SuzBanyan »

HomeStretch wrote: Thu Dec 01, 2022 9:07 am Even outside of NJ, a joint WROS account holder may have some paperwork to complete if the survivor is not primary on the account. For example, Fidelity requires the surviving CMA joint account holder to set up a new CMA if the survivor’s SS# is not primary on the account.
That was my experience as a CA resident as well. The Vanguard brokerage account held by my husband and I as Trustees of the SuzBanyan Family Trust was transferred to a new brokerage account held by me, as Trustee of the Trust. The BofA checking account continued with the same account number, but I had to sign a new signature card and provide my SS#, as my husband’s SS# had been primary. Chase doesn’t seem to have any interest in making changes to the checking account which has me as the primary SS#. Chase is clearly aware of my husband’s death because they put a 6 month hold on his final SS check.

Notwithstanding a comment earlier, I would not assume that a Bank or other financial institution will not find out about the death until you inform it. I would count on having at most weeks, whether or not you provide notice. Still, there probably is some time to take action post death if you can work through the fog of grief. By the time BofA cancelled my card for which I was an additional cardholder, more than 3 weeks had gone by. I just wish I had cashed out his Rewards during that 3 weeks period. In stead, I have been told I will eventually receive a payment.
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Re: Joint accounts don't automatically transfer to survivor (in NJ)?

Post by SmileyFace »

Not New Jersey but I found every bank seemed to have their own rules. One of my parents passed away and I helped remaining parent clean up some accounts. Don't ask me how they ended up with checking/savings at 3 different brick-mortar banks. I was surprised to find that every bank had different rules. One bank would not allow the account to be renamed to just the survivor - the account had to be closed with a new one opened (pain if you have auto-bill-pay or direct deposits) while another bank allowed exactly that. We consolidated to a single bank and went with the one that was the easiest to deal with (e.g. the banks that required the account be closed didn't get a new one opened - thanks for 50 years of banking but goodbye). In my case it was my mother that passed away and my father was the primary on all these accounts.

DON'T CLOSE OR REMOVE-DECEASED FROM ALL ACCOUNTS too soon in case any refund checks, etc. come in to the deceased. Banks are happy to take the deposit of a deceased spouse if it's a joint account but it won't be possible if all account are closed or deceased person is no longer on the account. We left one joint account open for a year for this purpose.
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Re: Joint accounts don't automatically transfer to survivor (in NJ)?

Post by LadyGeek »

SmileyFace wrote: Thu Dec 01, 2022 9:50 am Not New Jersey but I found every bank seemed to have their own rules.
Yes, they do. I maintain a joint account with my late husband. Depositing a deceased spouse's check into a joint bank account You don't need to sign a person's name to endorse a check (unless it's cashed). Checks are deposited as "For deposit only".
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Re: Joint accounts don't automatically transfer to survivor (in NJ)?

Post by tfalk »

SuzBanyan wrote: Thu Dec 01, 2022 9:44 am
Notwithstanding a comment earlier, I would not assume that a Bank or other financial institution will not find out about the death until you inform it. I would count on having at most weeks, whether or not you provide notice.
Just had this exact situation in NJ this week. Funeral home notified social security. Social Security notified Wells Fargo.
I'm guessing it's because her SS check was auto deposited into a wells fargo account. MIL died 11/13, WF was notified on 11/30.
We were waiting to notify them until we had death certificate (which we got yesterday) and had been named executors.
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Re: Joint accounts don't automatically transfer to survivor (in NJ)?

Post by LadyGeek »

You may need to contact Social Security, as they'll likely take back that last payment. That's what happened when my husband passed.
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Re: Joint accounts don't automatically transfer to survivor (in NJ)?

Post by SuzBanyan »

LadyGeek wrote: Sat Dec 03, 2022 7:54 pm You may need to contact Social Security, as they'll likely take back that last payment. That's what happened when my husband passed.
If the SS payment was received in the month in which the death occurs, then Social Security is not entitled to take it back. It pays for the prior month and the beneficiary was alive for that entire month. If the payment comes the next month, then it is an overpayment and will need to be returned.
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Re: Joint accounts don't automatically transfer to survivor (in NJ)?

Post by tfalk »

SuzBanyan wrote: Sat Dec 03, 2022 9:00 pm
LadyGeek wrote: Sat Dec 03, 2022 7:54 pm You may need to contact Social Security, as they'll likely take back that last payment. That's what happened when my husband passed.
If the SS payment was received in the month in which the death occurs, then Social Security is not entitled to take it back. It pays for the prior month and the beneficiary was alive for that entire month. If the payment comes the next month, then it is an overpayment and will need to be returned.
Thanks, I'll keep an eye out to see if they take it back. In the grand scheme of things, it's a pittance so not really worried about it.
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Re: Joint accounts don't automatically transfer to survivor (in NJ)?

Post by SuzBanyan »

tfalk wrote: Sun Dec 04, 2022 9:56 am
SuzBanyan wrote: Sat Dec 03, 2022 9:00 pm
LadyGeek wrote: Sat Dec 03, 2022 7:54 pm You may need to contact Social Security, as they'll likely take back that last payment. That's what happened when my husband passed.
If the SS payment was received in the month in which the death occurs, then Social Security is not entitled to take it back. It pays for the prior month and the beneficiary was alive for that entire month. If the payment comes the next month, then it is an overpayment and will need to be returned.
Thanks, I'll keep an eye out to see if they take it back. In the grand scheme of things, it's a pittance so not really worried about it.
Chase Bank put a 6 month hold on the last payment received in the same month as my husband died, but one day after his death. Chase says that they need a written statement from SSA that the funds are properly paid and SSA says that they can’t do anything as long as Chase has not rejected the receipt of funds. So I am probably going to be waiting until next April when the hold expires.
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Re: Joint accounts don't automatically transfer to survivor (in NJ)?

Post by SuzBanyan »

SuzBanyan wrote: Sun Dec 04, 2022 12:59 pm
tfalk wrote: Sun Dec 04, 2022 9:56 am
SuzBanyan wrote: Sat Dec 03, 2022 9:00 pm
LadyGeek wrote: Sat Dec 03, 2022 7:54 pm You may need to contact Social Security, as they'll likely take back that last payment. That's what happened when my husband passed.
If the SS payment was received in the month in which the death occurs, then Social Security is not entitled to take it back. It pays for the prior month and the beneficiary was alive for that entire month. If the payment comes the next month, then it is an overpayment and will need to be returned.
Thanks, I'll keep an eye out to see if they take it back. In the grand scheme of things, it's a pittance so not really worried about it.
Chase Bank put a 6 month hold on the last payment received in the same month as my husband died, but one day after his death. Chase says that they need a written statement from SSA that the funds are properly paid and SSA says that they can’t do anything as long as Chase has not rejected the receipt of funds. So I am probably going to be waiting until next April when the hold expires.
As a follow up to my last post in this thread, the 6 month hold that Chase placed on the SS deposit into the account I held jointly with my husband has now expired. The account shows the deposit dated September 2022 and now the 2022 income from SS matches the 1099-G I received earlier this year.
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Re: Joint accounts don't automatically transfer to survivor (in NJ)?

Post by tfalk »

tfalk wrote: Sun Dec 04, 2022 9:56 am
SuzBanyan wrote: Sat Dec 03, 2022 9:00 pm
LadyGeek wrote: Sat Dec 03, 2022 7:54 pm You may need to contact Social Security, as they'll likely take back that last payment. That's what happened when my husband passed.
If the SS payment was received in the month in which the death occurs, then Social Security is not entitled to take it back. It pays for the prior month and the beneficiary was alive for that entire month. If the payment comes the next month, then it is an overpayment and will need to be returned.
Thanks, I'll keep an eye out to see if they take it back. In the grand scheme of things, it's a pittance so not really worried about it.
Also a follow up to my last post, SSA did not take back the last SS payment. Also the only trouble we had with Wells Fargo
transfering the accounts that were joint held by my wife and her mother into my wifes names was it taking almost 4 hours to complete.
4 hours of wasted time by the branch rep and us sitting waiting on hold for WF's estate division to tell her how to properly do the paperwork,

That was the 'easy' part dealing with Wells Fargo, Everything else we've had to deal with them has gotten worse with each issue.
They are losing a high 6 figure account this week because of their sheer incompetence. The rest will follow in due time.
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Re: Joint accounts don't automatically transfer to survivor (in NJ)?

Post by Liberty4Ever »

It’s interesting how an inheritance tax can be assessed, without any proof that one actually inherited anything.

Let’s say one spouse put in all of the deposits, and the other spouse never put in anything. When the other spouse (non-contributing) dies, what is the original spouse, who actually put in the money, inheriting? Sounds to me like the death should just remove the dying spouse from those with signature authority over that account. The deceased spouse didn’t spend or otherwise commit the balance before their death.

How can you inherit your own money? A day before the death of the spouse, the first spouse could have withdrawn ALL of the funds. Yet a day later, someone just decides that the funds are to be divided evenly?

So if the first spouse withdraws everything, which he has authority to do, and a creditor of the second spouse shows up a day later, when the assets are gone, can that creditor successfully argue that the first spouse owes them some of those assets?

I am NOT a lawyer, so I don’t think like one. I guess it depends on what the meaning of the word is is. 😡
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