Q: My wife/I have a joint owned savings acct. My adult son isn't a signer. Can we add him as signer or will there be taxes
The money in the savings acct ($35000.00) came from a joint checking account owned by me and my son (32 years old now, acct opened when he was minor). The money in the checking account is earned by him with employment direct deposit. I have been transferring money monthly for many years from the checking to the savings with his permission since he doesn't have the discipline to save. If I add him to the savings account (since it's really his money) will there be tax consequences if he withdraws a large amount in the years to come for a mortgage or do we have to gift it to him? If we have to gift it, do we have to physically transfer it to a savings account opened by him 14k each total 28k from my wife and me this year and next or can we make him a signer and just calculate on paper how much of the total was gifted to him each year.
A: It seems like the savings account was really an account where you were holding these funds in trust for your son and he was the beneficial owner of the funds all along. If he was always the beneficial owner of these funds, then the money moving to the savings account would not have been a gift to you and your wife when it was transferred and adding his name to the account would also not be a gift to your son. If this issue comes up in audit, you will have to be able to provide proof of this arrangement, but you may be able to satisfy this with a signed document (executed before the IRS ever questions the arrangement) confirming that your son was allowing you to hold these funds for him and the circumstances of the arrangement. I would recommend seeking assistance with drafting this document and with verifying the possible impact of trust laws in Texas on this sort of arrangement.
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