Completed Gift with JTWROS

Course: Estate Planning
Lesson 1: Property Ownership

Student Question:

In the example here of a completed gift, doesn’t Harry still have rights to the condo if it is a JTWROS? How is that considered a completed gift?

Example

Harry buys a condominium for $200,000. He wants his brother, Hank, to get the property when he dies, so he titles the property in joint tenancy with right of survivorship. Because local state law allows either party to unilaterally sever his or her interest in the property, then Harry has made a gift of $100,000 to Hank.

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Instructor Response:

Great question.  The gift is a completed gift because Harry has no control over the gift once it is made.  Harry cannot reclaim the gift.  It’s true that if Hank died first, Hank’s interest would transfer to Harry under state law.  The reverse is also true, if Henry died first, Henry’s interest would transfer to Hank.  The key point here is that the operation of state law is not within Henry’s control, hence Henry has relinquished control of the interest gifted to Hank.