Hi everyone,
I have a few questions regarding joint brokerage accounts (held in the US) and the declaration of assets as well as inheritance. I’m a US citizen, Japan tax resident but have my investments in US brokerages. I know I need to speak with a tax professional to get the best information but wanted to throw this out here to see if any of you have any ideas.
My main brokerage account has a parent listed as a joint account holder. Originally it was just in my name but we added the parent's name when I first moved abroad over 20 years ago just for ease of access (I didn't always have good internet access at the time and the brokerage online systems wern't as good as they are now). In practice, it is my account and I have been the one contributing to it and managing it. The brokerage doesn't have 20+ years of my transaction records to show all the deposits and such.
With the yen so weak, there is a possibility that by December 31, 2023 I will pass the ￥50 million limit for reporting foreign assets.
My questions are:
1. Is there a clear way to show that although two names are listed on the account, it is in fact 100% mine?
2. If my parent passes away while their name is on the account will the Japan Tax Office consider some of this account as inheritance?
3. Is in best to remove the parent from the account before I hit the limit for being required to report foreign assets?
Thank you for any help in advance!
US Joint Account - inheritance issues?
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captainspoke
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Re: US Joint Account - inheritance issues?
Simply removing your parent's name may be an option, but one aspect of this may depend on which specific broker it is. As you may have heard/read, there are a few brokers that will continue to serve US expat customers here, and others that won't--they'll ask that you close your account with them in 60-90 days, something like that. Vanguard, Schwab, and I think Firstrade seem to allow US expat account holders to continue with their accounts, while Fidelity and Merrill Lynch do not. So with the latter two, apart from your inheritance question, removing your (US resident) parent's name--and address--from the account could cause some separate headaches.
Though I'm not a CPA/lawyer, the NTA here seems to take a pragmatic approach to some things. Eg, for gift taxes it is the underlying reality of who 'owns' (controls, benefits from) the money, rather than the technical bits about whose account it came from and then went into. Something similar may be the case here--the reality is that it is your account/money, and your parent being listed on it could be considered to be a matter of convenience, that they are not effectively the owner/controller of the account. If you can show that it is your money that funded the account, that you control what happens within the account, and that you're the one declaring it and paying taxes on it (not sharing/dividing that responsibility), then you're probably on the way to the account being considered yours.
Another consideration is the US tax side--if your parent dies, will the IRS (and the state they are in) consider this account to be a part of their estate? If the answer is yes, then explaining that to the NTA here will be more challenging; if no, then probably much easier.
Edit: You don't have to answer here, but have you been filing all of the gains, interest, dividends from this account on your taxes here? To my eyes, this would be a good step toward showing the reality of your control/ownership. And the same for the US--do the 1099s and so on come to you, and do you then claim/list all those things on your US tax forms--are you responsible for that--or do you somehow 'share' any gains/dividends with the co-listed parent at tax time? If you have been claiming the account on your taxes (both there and here), your case for ownership would be strengthened, if not, or perhaps only here and not there (or somehow sharing that there), it may be weaker. (<for both the NTA here, and if the acct was to be considered a part of your parent's estate there in the US)
Though I'm not a CPA/lawyer, the NTA here seems to take a pragmatic approach to some things. Eg, for gift taxes it is the underlying reality of who 'owns' (controls, benefits from) the money, rather than the technical bits about whose account it came from and then went into. Something similar may be the case here--the reality is that it is your account/money, and your parent being listed on it could be considered to be a matter of convenience, that they are not effectively the owner/controller of the account. If you can show that it is your money that funded the account, that you control what happens within the account, and that you're the one declaring it and paying taxes on it (not sharing/dividing that responsibility), then you're probably on the way to the account being considered yours.
Another consideration is the US tax side--if your parent dies, will the IRS (and the state they are in) consider this account to be a part of their estate? If the answer is yes, then explaining that to the NTA here will be more challenging; if no, then probably much easier.
Edit: You don't have to answer here, but have you been filing all of the gains, interest, dividends from this account on your taxes here? To my eyes, this would be a good step toward showing the reality of your control/ownership. And the same for the US--do the 1099s and so on come to you, and do you then claim/list all those things on your US tax forms--are you responsible for that--or do you somehow 'share' any gains/dividends with the co-listed parent at tax time? If you have been claiming the account on your taxes (both there and here), your case for ownership would be strengthened, if not, or perhaps only here and not there (or somehow sharing that there), it may be weaker. (<for both the NTA here, and if the acct was to be considered a part of your parent's estate there in the US)
Re: US Joint Account - inheritance issues?
Thank you Captainspoke. That was very helpful as always!
The only reason I'm hesitant to take the parent's name off the account is concern about the brokerage deciding that they will close it since I am a Japan resident. That said, I do still have the same US address so can hope they would not close it. The account is with Schwab and while I know they technically don't serve residents in Japan it seems like I may be able to keep the account open as long as I maintain a US address.
Do you (or anyone else reading) know if Schwab grandfathers in existing customers even in Japan or if it's a case of maintaining a US address and not explicitly telling them that you live in Japan?
Also, in cases where the brokerage asks you to close your account, do you have to sell everything (with the huge taxes that would result in) or could it be transferred to a different broker like Interactive Brokers?
The only reason I'm hesitant to take the parent's name off the account is concern about the brokerage deciding that they will close it since I am a Japan resident. That said, I do still have the same US address so can hope they would not close it. The account is with Schwab and while I know they technically don't serve residents in Japan it seems like I may be able to keep the account open as long as I maintain a US address.
Do you (or anyone else reading) know if Schwab grandfathers in existing customers even in Japan or if it's a case of maintaining a US address and not explicitly telling them that you live in Japan?
Also, in cases where the brokerage asks you to close your account, do you have to sell everything (with the huge taxes that would result in) or could it be transferred to a different broker like Interactive Brokers?
Re: US Joint Account - inheritance issues?
Schwab allows me to keep my account even though the only address registered with them is my Japan address. I had initiated the account maybe a decade before coming to Japan. It makes the account fall under their "International" log in screen and means that they will not sell me any mutual funds (a very common restriction for expat accounts) but don't restrict ETF or stock purchases in any way.
In general when you have someone else's name also on a financial account, that account becomes subject to their creditors. That is not such a big issue in Japan with its infrequent lawsuits and relatively few needs-based programs (and of course Japan doesn't allow joint accounts domestically anyway) but in the US that can be a significant issue especially if one of the names on the account is elderly.
In general when you have someone else's name also on a financial account, that account becomes subject to their creditors. That is not such a big issue in Japan with its infrequent lawsuits and relatively few needs-based programs (and of course Japan doesn't allow joint accounts domestically anyway) but in the US that can be a significant issue especially if one of the names on the account is elderly.
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captainspoke
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- Joined: Tue Aug 15, 2017 9:44 am
Re: US Joint Account - inheritance issues?
Maybe with the schwab account you could approach it in two stages--1) get the acct under your name only, then 2) change the address, if you do choose to do that, at a later date.
I have a schwab account that I got while already here, about 20yrs ago, so before the changes that now make that impossible. I had a vanguard acct at the time, which I closed--and with hindsight it would have been wise to keep it open as a fallback, given the state of things now. At some point in there I asked schwab about setting up accts for our US citizen kids (custodial), but was too late, they were then no longer opening new accts for people here, even with that kind of connection.
They do run a business, and I can understand a biz like that not wanting to serve a lot of lower level banking functions for customers who are not also investors (a version of something that's more trouble than it's worth). It's been a while since I looked, but schwab does have international services in other parts of asia, and IIRC the account minimum is $25k. Interactive Brokers (IB) used to have a $10k threshold, which I think did deter some people here from starting accounts with them (below that, and there were certain account maintenance fees). The bottom line here is that the more money you have with them, the more valuable you are as a customer, and perhaps the more confidence you might have when changing your address. (but perhaps that's just speculation)
I hear you on the tax prep for US filing. I've used turbotax (TT) for some years now, and tho some aspects of it frustrate me, the beauty/magic of it is that it will ping the schwab account and all that 1099 stuff flows in in about 10 seconds. Accurately, into the right places on the forms, and so on. Yes, the TT version that does that costs money, ~$65 off amazon US, but it is very much worth it.
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There are two avenues open for US expats using advisory services. One I heard about quite a while back, Thun Financial Advisors (which seems to be called Creative Planning Int'l now). The other one I heard of very recently is Argentum, in Tokyo. IIRC, Thun could open a US-based schwab account for expats here. Argentum says on their internet page that they do that with Fidelity. I'm not sure what that service costs--I've never followed up with either one. But if push came to shove, and schwab did decide to stop serving someone like me, I'd explore using Thun (transferring the acct to under their umbrella), at least as an intermediate term solution. Transfers of holdings should be okay between US brokers (no sales/repurchases, no tax events). But I'd bet money that that is impossible to do internationally.
Enough for this evening...
I have a schwab account that I got while already here, about 20yrs ago, so before the changes that now make that impossible. I had a vanguard acct at the time, which I closed--and with hindsight it would have been wise to keep it open as a fallback, given the state of things now. At some point in there I asked schwab about setting up accts for our US citizen kids (custodial), but was too late, they were then no longer opening new accts for people here, even with that kind of connection.
They do run a business, and I can understand a biz like that not wanting to serve a lot of lower level banking functions for customers who are not also investors (a version of something that's more trouble than it's worth). It's been a while since I looked, but schwab does have international services in other parts of asia, and IIRC the account minimum is $25k. Interactive Brokers (IB) used to have a $10k threshold, which I think did deter some people here from starting accounts with them (below that, and there were certain account maintenance fees). The bottom line here is that the more money you have with them, the more valuable you are as a customer, and perhaps the more confidence you might have when changing your address. (but perhaps that's just speculation)
I hear you on the tax prep for US filing. I've used turbotax (TT) for some years now, and tho some aspects of it frustrate me, the beauty/magic of it is that it will ping the schwab account and all that 1099 stuff flows in in about 10 seconds. Accurately, into the right places on the forms, and so on. Yes, the TT version that does that costs money, ~$65 off amazon US, but it is very much worth it.
*
There are two avenues open for US expats using advisory services. One I heard about quite a while back, Thun Financial Advisors (which seems to be called Creative Planning Int'l now). The other one I heard of very recently is Argentum, in Tokyo. IIRC, Thun could open a US-based schwab account for expats here. Argentum says on their internet page that they do that with Fidelity. I'm not sure what that service costs--I've never followed up with either one. But if push came to shove, and schwab did decide to stop serving someone like me, I'd explore using Thun (transferring the acct to under their umbrella), at least as an intermediate term solution. Transfers of holdings should be okay between US brokers (no sales/repurchases, no tax events). But I'd bet money that that is impossible to do internationally.
Enough for this evening...