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Tax Basics in Hawaii: Value of Joint Property Included in Estate

12/21/2012

 
     We’ve previously discussed the types of property ownership, but in this post I’d like to talk about how the value of joint property is included (or not) in a person’s estate at death.
     Generally speaking, if a decedent owned property as joint tenants, the entire value of the property is included in his estate.  There are a couple exceptions to this rule.
     Contribution.  The amount included is limited by the contribution made by the deceased joint tenant.  Thus, if it can be shown that a joint tenant made a contribution to the principal of the property, then only that percentage of the property’s value will be included in the decedent’s estate.  For example, if Abel and Cain each contributed $1,000 to buy some property to buy $2,000 worth of stock.  The stock appreciates and is worth $5,000 at Abel’s untimely death. Only 50% of the value of that property ($2,500) will be included in Abel’s estate.  This concept may be better understood with this equation:
     Contribution by decedent/Total contribution by all tenants x value of joint property = Amount included in decedent’s estate
     Any consideration by the surviving co-tenant does not include amounts that were originally gifted to the surviving co-tenant by the decedent.  For example, Abel gave Cain $5,000 and Cain deposited it into an account and added Abel as a joint tenant.  If Abel dies before Cain, the entire $5,000 would be included in Abel’s estate.
     Tenancy by the Entirety (husband and wife as joint tenants):  When two people are married and hold property either as joint tenants or as tenants by the entirety, exactly one-half of the value of the property is included in the decedent’s estate.  The amount contributed by either spouse does not matter.  

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    Samuel K.L. Suen is an attorney based in Honolulu, Hawaii specializing in estate planning, probate, conservatorship and guardianship matters.

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