Estate tax and POD/TOD accounts

Nov 18, 2011 2 Replies
R

I know that assets in accounts registered "Pay on death to XXXX" or "Transfer on death to XXXX" while not in the probate estate are part of the taxable estate.



I assume that even though those assets are never in the probate estate and go straight to the named beneficiaries they are subject to clawbacks from the named beneficiaries in the event that the assets of the probate estate aren't sufficient to pay the estate tax (because if there was no clawback, it would be a too-easy way to avoid estate tax!)



Is the assumption true? If it is, how is it enforced?


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S

I think you're right, not only as to taxes but as to other debts of the decedent as well. But I am not aware that it's ever been tested.

The legal mechanism is that it meets the legal definition of a fraudulent transfer. That's what it's called, but fraud is not a requirement. What is required is that there be a transfer for insufficient consideration that leaves the transferor unable to pay all his expenses.

___ Stu

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A

Yes. For information and governing law on estate tax liens see IRC Sec.

6324 and the Treas. Reg. 301.6324-1. Finally, look at the IRM 5.5.8.
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