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