The general rule under the Internal Revenue Code is that non-domiciliaries of the United States must include the full value of jointly held property in their gross estate for estate tax purposes. This hits some parties especially hard, such as those who include their spouse as tenants by the entireties or a family member as a joint tenant with right of survivorship.
There are some exceptions to this general rule. One of these is to prove that the joint party contributed to the purchase. One example would be an unmarried couple who each contributed 50% from their own account towards the purchase price. The important thing here is to preserve proof of these contributions so that the estate can demonstrate this allocation upon the death of one of the owners.
Many time, a tax treaty can impact the application of this general rule as well. It is important to note that relief under a treaty is not automatic. Instead, the estate must file an estate tax return and affirmatively elect the benefits under the treaty.
To Secure the filing of estate tax returns and the payment of estate taxes, the Federal government, by operation of law, receives an automatic estate tax lien upon all property of the decedent upon his or her passing. This lien covers the estate taxes and any applicable interest that may accrue thereon.
This means that the surviving owner of the (previously) jointly held property does not have clear title to the property and cannot convey marketable title without clearing up the estate tax lien.
This can be accomplished by filing an estate tax return and requesting a discharge of the personal representative from personal liability or by filing an Application for Release of a Federal Tax Lien with the IRS Lien Unit.
Disclaimer: This Article is for general information purposes only and does not constitute legal advice.