Ashford International Law P.C.

Summary

1. Joint title with a right of survivorship moves an asset outside probate. It does not move it outside the estate tax, and in a cross-border family it usually puts more of the asset into the taxable estate rather than less.
2. The default rule includes the entire value in the first decedent’s estate except so far as the survivor’s own contribution can be proved (section 2040(a)). The rule that includes only half applies to spouses, and it is switched off where the surviving spouse is not a United States citizen.
3. Creating the joint title can itself be a gift, and when it happens depends on the asset: at once for real property and for most investment accounts, only on withdrawal for a bank account.
4. Germany and France have no right of survivorship. The survivor of a German or French joint account can operate it, but the deceased’s half falls into the estate, and the same equal-shares assumption exposes the original funding to gift tax.
5. Contribution records are the whole of the defence, and they are obtainable now and not after the first death.

Part I. What joint title does, and what it does not do

Joint tenancy with right of survivorship, and its marital variant tenancy by the entirety, are among the most heavily used devices in American estate planning, largely because they work without a lawyer. The asset passes to the survivor on the first death by operation of law: no probate, no court, no delay, and no need for the will to say anything about it.

That is the whole of what it does. It does not reduce the taxable estate. It does not create a marital deduction. It does not protect against creditors in most states. It overrides the will, so a carefully drafted plan can be defeated by the way an account was opened at a branch. And in a family whose members are not all United States persons, or whose assets are not all in the United States, it introduces three further problems: an inclusion rule that works against the family, a gift on creation that nobody intended, and a foreign legal system that does not recognise survivorship at all.

Part II. How much goes into the taxable estate

The general rule is the consideration-furnished rule. The entire value of property held jointly with right of survivorship is included in the first decedent’s gross estate, except such part as may be shown to have belonged originally to the other joint owner and never to have been acquired from the decedent for less than full consideration (section 2040(a)). The drafting matters: full inclusion is the starting point, and it is the estate that must prove the survivor’s contribution. Contribution traceable to money the decedent gave the survivor does not count.

The exception is for spouses. Where the only joint owners are a husband and wife, half the value is included regardless of who paid, and contribution becomes irrelevant (section 2040(b)). The exception is narrow in two ways. It applies only if the spouses are the only joint tenants, so adding an adult child to the deed throws the whole interest back into the general rule. And it does not apply at all where the surviving spouse is not a United States citizen: section 2056(d)(1)(B) switches off section 2040(b) in that case, so a couple in which one spouse holds a foreign passport is back to proving contribution.

Applied to a nonresident couple, the effect is severe. A German husband and wife who buy a Florida apartment in joint names, with the purchase funded from an account in his name, will on his death have the whole apartment in his United States gross estate, against an exemption of $60,000, with no marital deduction unless a qualified domestic trust or a treaty provision applies. The joint title has not helped and the absence of records has made it worse.

Part III. When creating the joint title is itself a gift

Putting another person’s name on an asset can be a completed gift at that moment, or later, or not at all, and the answer depends on whether the original owner can take the property back without the other’s consent.

For a bank account, he can. A joint bank account, or a savings bond registered as payable to either of two people, is not a completed gift when it is opened. The gift occurs only when the other party draws on the account for his own benefit without any obligation to account for the money (Treasury Regulation section 25.2511-1(h)(4)).

For other property he cannot, and the gift is immediate. Where one person buys property with his own funds and has title conveyed to himself and another as joint owners with rights of survivorship, there is a gift of half the value at that moment (Treasury Regulation section 25.2511-1(h)(5)). Investment and brokerage accounts generally fall on this side rather than the bank account side, though the answer turns on the account agreement and on state law, so the documents are worth reading rather than assuming.

Two qualifications matter for cross-border couples. Where the donee is a spouse who is a United States citizen, the gift is fully covered by the unlimited marital deduction (section 2523(a)). Where the donee spouse is not a United States citizen, the deduction is unavailable, but the charge is not immediate either: section 2523(i)(3) revives the principles of the repealed section 2515, without its election, so a joint tenancy or tenancy by the entirety in real property is not a completed gift at creation and the consequence is deferred until the tenancy is severed or terminated. And where the owner is a nonresident who is not a citizen, the gift tax reaches only real and tangible property in the United States, so creating a joint interest in an American house can be a gift while creating one in an American brokerage account is not (sections 2501(a)(2) and 2511(a)).

Part IV. Basis

The inclusion rule and the basis rule are two sides of one coin, and the coin sometimes lands the right way up. Property acquired by survivorship takes a new basis equal to its value at death only to the extent that it was included in the decedent’s gross estate (section 1014(b)(9)). Where the full consideration rule forces the entire value into the estate, the entire value is also adjusted, which for appreciated property is a real offset against the estate tax.

Community property goes further. Where property was held as community property under the law of a state or of any foreign country, and at least half of the community interest was includible in the decedent’s gross estate, the whole of it is adjusted to value at death and not merely the decedent’s half (section 1014(b)(6)). The reference to a foreign country is deliberate and it is one of the few places where American tax law gives an advantage to a couple married under a continental community regime, provided the regime is documented.

The trap sits at the other end. Section 1014(b)(9) requires inclusion in the United States gross estate, and foreign-situs property owned by a nonresident decedent is never included. An American who survives a foreign joint owner of a house in Italy therefore gets no basis adjustment on the part he takes by survivorship, even though he is fully taxable in the United States when he sells it. Had the same share passed to him by inheritance instead, section 1014(b)(1) would have applied and he would have had the adjustment. The form of ownership, chosen years earlier for convenience, decides it.

Part V. What the foreign system does with a joint title

Neither Germany nor France has a right of survivorship, and the American expectation that the asset simply becomes the survivor’s is wrong in both.

Germany. German succession is universal: the whole of the deceased’s property passes as a unit to the heirs at the moment of death (section 1922 BGB). There is no mechanism by which a co-owner’s share is extinguished in favour of a survivor. A joint account, the Oder-Konto, works on two levels. Towards the bank, the holders are joint creditors and either may demand the whole balance (section 428 BGB), so the account continues to operate on the survivor’s signature after the first death unless the heirs object. Between the holders, entitlement is equal unless otherwise agreed (section 430 BGB), so the deceased’s half falls into the estate and passes to the heirs, who can call the survivor to account for it. The survivor keeps the power to withdraw and not the right to keep. Jointly titled German real property is fractional co-ownership, and each owner’s fraction passes to his own heirs.

The same equal-shares assumption creates a gift tax exposure during life. A payment by one spouse into a joint account can be a gratuitous transfer of half the amount to the other. The Bundesfinanzhof held in its judgment of November 23, 2011 (II R 33/10) that the tax office bears the burden of proving the elements of a gift, including that the non-contributing spouse was in fact and in law free to dispose of half the balance; but that where there are sufficiently clear objective indications that the spouses are entitled in equal shares under the default rule of section 430 BGB, the burden shifts to the spouse assessed, who must then show that internally only the paying spouse was entitled. What tips it is usually how the account was used: the more the non-contributing spouse drew on it to build assets of her own, the stronger the case for a gift. A written agreement on the internal allocation, made when the account is opened, is what prevents the argument.

France. A compte joint continues to function on the survivor’s signature after a death, unlike an individual account, which is blocked. For inheritance tax, sums in a joint account are presumed to belong to the holders in equal shares and to form part of each estate accordingly (article 753 of the Code general des impots). The presumption can be displaced in either direction, but the taxpayer can displace it only by the deposit agreement itself or by instruments having a certain date, which is a higher standard than the administration must meet.

French law does offer something closer to survivorship, the tontine or clause d’accroissement, under which co-purchasers each acquire subject to a condition, and on the first death the survivor is treated as having been sole owner from the outset. Civil law treats the property as never having entered the succession, which places it beyond the reserved share. Tax law disregards that retroactivity and taxes the accrual as a transfer on death at the rate applicable between the two people, which for unmarried co-purchasers is 60 percent (article 754 A). The only relief is for two individuals acquiring immovable property as their common principal residence with a total value below 76,000 euros. For a married couple the clause achieves nothing, because the surviving spouse is already exempt from French inheritance tax (article 796-0 bis).

Part VI. Documenting contribution

Where the consideration-furnished rule applies, the entire case rests on records, and the records are bank statements, purchase contracts, closing documents, loan agreements and payroll or business income showing that the survivor had money of her own and used it. In a marriage of thirty years with a shared account and a career break, that evidence often no longer exists, and the estate is left with the default: full inclusion.

The work is small if it is done while both spouses are alive. A short memorandum of contribution, signed and dated, with the supporting statements attached, prepared when the asset is acquired or when the position is first reviewed, is enough. Where a foreign matrimonial property regime is doing part of the work, the regime itself should be documented in a form an American bank, registry or examiner will act on, because none of them will take it into account otherwise. That is treated on marital property regimes.

Part VII. The alternatives

Most families use joint title because they want the asset to reach the survivor quickly and without a court. There are better ways to achieve that, and each has its own cross-border consequence.

A transfer on death registration on securities, or a payable on death designation on a bank account, gives the same probate avoidance with none of the lifetime gift problem and none of the loss of control, and both are accepted by American custodians. A transfer on death deed does the same for real property in the states that allow it. A revocable trust achieves the result across several states at once and is the usual answer for a family with property in more than one, but it is not recognised in Germany or France and should not hold assets in either. Tenancy in common keeps each share in its owner’s estate and is the right form where the two owners have different families to provide for. A beneficiary designation on a retirement account overrides everything else and is the single most frequently neglected document in these families.

None of these removes the transfer certificate requirement where the decedent was a nonresident; that applies to the asset rather than to the manner of holding it, and is described on non-US decedents.

Part VIII. Practical steps

1. List every jointly held asset with the form of ownership, as the institution actually records it, not as the family describes it.
2. Establish each owner’s citizenship and domicile. A non-citizen survivor switches off the half-inclusion rule.
3. Assemble the contribution evidence now, in a signed memorandum with statements attached.
4. Check what the joint title did on the day it was created. For real property and most investment accounts it was a gift of half.
5. Remove third parties from spousal joint titles. Adding a child defeats the half-inclusion rule for the whole asset.
6. Do not hold German or French assets in an American form. The survivorship the family is relying on does not exist there.
7. Document the matrimonial property regime in a form an American institution will accept.
8. Replace convenience joint titles with transfer on death or payable on death designations where the only purpose was to avoid probate.
9. Review every beneficiary designation at the same time, because it overrides the will.

Conclusion

Joint title is a probate device that families treat as a tax device. In a purely American marriage the mistake is usually harmless. In a family with a non-citizen spouse, a foreign parent or an apartment in Europe, it produces full inclusion in the taxable estate, an unintended gift on the day the account was opened, a basis result that depends on which side of a survivorship line the asset falls, and a foreign legal system that gives the survivor the right to withdraw but not the right to keep. The remedy is not usually complicated; it is a matter of choosing the right form of ownership and writing down, while both owners are alive, who actually paid for what.

How the firm helps

Ashford International Law PC reviews jointly held assets for cross-border families: identifying the form of ownership as the institution records it, establishing what will be included in the taxable estate and on what evidence, assembling contribution records, unwinding joint titles that created unintended gifts, documenting foreign matrimonial property regimes for American institutions, and replacing convenience joint titles with instruments that achieve the same result without the tax consequence. Related pages cover US decedents with non-US assets, asset and tax planning for non-US residents with US assets, estate planning for non-US citizens, non-US decedents, non-US beneficiaries, gift planning, marital property regimes and asset protection. Defined terms are collected in the Topics A-Z.

This page is intended for general educational purposes and does not constitute legal or tax advice, nor does it create an attorney-client relationship. The matters described depend on the specific facts, the countries and states concerned, and the law in effect at the relevant time. Statuses and figures are stated as of September 2026 and must be confirmed before any decision.