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cporro

Posted: Fri Aug 10, 2007 4:39 am

Guest

i do most of the investment for my family. at this point its just a
college savings account and a mutual fund account. these accounts are
linked to my bank account. it would be most convenient for my wife to
deposit her contributions into my linked bank account and then for me
to invest the money. i'm wondering if there might be some unexpected
tax (or otherwise) consequence from doing things this way. we have
been filing jointly so i assume her money counts as my money and vice
versa. we live in california, have no pre-nup, and are under the
impression that in the impossible event of divorce we would, by law,
split everything.

thoughts?

joetaxpayer

Posted: Fri Aug 10, 2007 4:56 am

Guest

cporro wrote:

Quote:

As long as she is a citizen, there is no limit to how you transfer
between the two of you. Enough transfers over $10K and you may get a
call from the IRS, wondering about money laundering, but you seem to
imply regular lower transfers.
Mrs. Taxpayer and I have individual checking accounts, as well as a
joint account. Each payday we keep enough for our own accounts, and send
the rest to joint to handle the bills. We both observed our two sets of
parents fumbling over each other working out of the same checkbook.
Weren't going to repeat that mistake. You should be fine.
JOE

PeterL

Posted: Sat Aug 11, 2007 1:20 am

Guest

On Aug 9, 5:39 pm, cporro <cpo...@gmail.com> wrote:

Quote:

Seems way too complicated. Couldn't she also link her account to the
investment accounts? And why aren't the investment accounts under
both names?

Either way between spouses no problem.

Dave Dodson

Posted: Sat Aug 11, 2007 3:52 am

Guest

On Aug 9, 7:39 pm, cporro <cpo...@gmail.com> wrote:

Quote:

California is a "community property" state. That means that, with
limited exceptions, anything you acquire during your marriage belongs
equally to both of you. For example, pay for work is community
property. You can bring separate property into a marriage, and an
inheritance left to one spouse may be treated as separate property.
However, you must be diligent to maintain separate property, as any
commingling of community into separate property converts it all to
community property. E.g., you inherit $10,000, which you desire to
preserve as separate property. You deposit the check into your
checking account into which you also deposit your pay check. The
inheritance has been commingled with community property, and therefore
has become community property.

If you and your spouse have separate checking accounts, into which
each of you deposit your pay checks, then, even though both accounts
may be in a single name, they would be community property. Any
investment accounts created or added to from such a checking account
would be community property, no matter how it is titled.

You can learn more by googling "california community property".

Dave

Posted: Sat Aug 11, 2007 4:04 am

Guest

cporro wrote:

Quote:

it would be most convenient for my wife to
deposit her contributions into my linked bank account and then for me
to invest the money. i'm wondering if there might be some unexpected
tax (or otherwise) consequence from doing things this way.

we live in california, have no pre-nup, and are under the

Quote:

impression that in the impossible event of divorce we would, by law,
split everything.

Spouses can make unlimited transfers between themselves without concerns
about gift tax, so that's not an issue. You mentioned that one of the
destination accounts is a college savings plan though so you need to
keep an eye on the amount transferred to that each year - but only if
those contributions, plus other gifts to the plan beneficiary, total
more than $12k annually. You can do it, but the IRS wants you to file
some paperwork.

CA is a community property state so what you're doing could have an
effect if your account started as separate property (e.g. money from
before the marriage, an inheritance). Once you commingle community and
separate property to the point where it can't be distinguished you will
probably turn it all into community property. The two are treated
differently at the death of one spouse, and are treated differently in
divorce. One can come up with scenarios where income taxes end up
different, on a split return. So if your account began as separate
property and you deposit community property into it (e.g. earnings) and
pay your joint expenses, it's all going to get mixed up.

-Tad

cporro

Posted: Sat Aug 11, 2007 4:10 am

Guest

On Aug 10, 4:52 pm, Dave Dodson <dave_and_da...@Juno.com> wrote:

Quote:

On Aug 9, 7:39 pm, cporro <cpo...@gmail.com> wrote:

i do most of the investment for my family. at this point its just a
college savings account and a mutual fund account. these accounts are
linked to my bank account. it would be most convenient for my wife to
deposit her contributions into my linked bank account and then for me
to invest the money. i'm wondering if there might be some unexpected
tax (or otherwise) consequence from doing things this way. we have
been filing jointly so i assume her money counts as my money and vice
versa. we live in california, have no pre-nup, and are under the
impression that in the impossible event of divorce we would, by law,
split everything.

thoughts?

California is a "community property" state. That means that, with
limited exceptions, anything you acquire during your marriage belongs
equally to both of you. For example, pay for work is community
property. You can bring separate property into a marriage, and an
inheritance left to one spouse may be treated as separate property.
However, you must be diligent to maintain separate property, as any
commingling of community into separate property converts it all to
community property. E.g., you inherit $10,000, which you desire to
preserve as separate property. You deposit the check into your
checking account into which you also deposit your pay check. The
inheritance has been commingled with community property, and therefore
has become community property.

If you and your spouse have separate checking accounts, into which
each of you deposit your pay checks, then, even though both accounts
may be in a single name, they would be community property. Any
investment accounts created or added to from such a checking account
would be community property, no matter how it is titled.

You can learn more by googling "california community property".

Dave

thanks for the responses. as far as the amount goes it should be lower
then 50k anually. i may look into adding her to the accounts. one is
vanguard mutual fund account the other is a 529 college savings.
possible down the road there will be a brokerage.

Mark Bole

Posted: Sat Aug 11, 2007 5:26 am

Guest

cporro wrote:

Quote:

It is primarily a matter of convenience, then? A simple, automatic
monthly purchase of a fixed dollar amount in a given mutual fund (or,
though not advised, a money market fund) could easily be set up from
your spouse's regular checking account.

Who owns, and who is the beneficiary of, the college savings account --
your minor child? Your tax implications for a qualified college plan on
a married filing joint return are detailed in IRS Pub 970. If it is not
a qualified plan but simply an investment account, then a significantly
different set of tax rules apply.

Who owns the mutual fund? If it is an IRA, 401k, or similar retirement
plan, there can be exactly one owner for each account. If it is a
regular after-tax account, either a sole ownership or joint tenancy
could make sense.

Quote:

i'm wondering if there might be some unexpected
tax (or otherwise) consequence from doing things this way. we have
been filing jointly

Since you are asking about "unexpected tax (or otherwise)" consequences,
it would help if you stated what your expected consequences are, then
replies could either confirm, revise, or expand your expectations.

Quote:

we live in california, have no pre-nup, and are under the
impression that in the impossible event of divorce we would, by law,
split everything.

Well, not everything Wink

Here is one extreme scenario: if one spouse is
deliberately failing to report taxable income, and the other spouse can
build a case that he or she had no reason to know about it because his
or her spouse controlled all the family finances, the so-called
"innocent spouse" may be off the hook for paying future federal income
tax assessments.

-Mark Bole

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