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Monday, April 24, 2017

We recently received a couple interesting Idaho MSA questions from an elderly account holder who was looking for guidance on the rules and regulations the Idaho MSA abides by for joint account holders and death benefits.  The questions were as follows:

  1. "What happens to my Idaho MSA (and the money therein) after I pass away?"
     
  2. "Who can I list as a joint account holder?  Do they have to be a spouse, or can I list an adult child?"

Those are two fantastic questions that deserve some clarification here, especially due to the reasons why the account holder was asking.  We actually consulted with the Idaho Tax Commission to get definitive answers, and we are happy to share those below.

Death of the Primary Account Holder:

Upon the passing of the primary account holder, there are 2 potential outcomes based on whether or not there is a joint account holder listed on the account (that is still alive).

Joint Account Holder Listed:

If there is a joint account holder listed, there is no change to the account.  The joint account holder becomes the primary account holder, and nothing else happens with the money from a taxation perspective.  Essentially, nothing on the account changes.

No Joint Account Holder Listed:

If there is no joint account holder listed, the account no longer qualifies as an Idaho MSA.  We then move to the beneficiary/beneficiaries listed (including an estate).  The money in the dissolved Idaho MSA must be included as taxable income, minus any of the decedent's eligible medical expenses that can be paid out of the account for up to 1 year following their death.

Eligible Joint Account Holders:

This was an interesting question due to the nature in which it was being asked.  This particular person's spouse was deceased and was interested in listing an adult child as a joint account holder.  Why, you ask?  Because in the event of the primary account holder's passing, the Idaho MSA could just essentially be transitioned to the joint account holder (adult child), and would not need to be dissolved and included as taxable income as if the adult child was just a beneficiary.

Unfortunately, joint account holders must be a spouse.  You can choose anyone you would like to have as a beneficiary/beneficiaries on your Idaho MSA, but that is not the case with the joint account holder.  So in this case, the adult child could not be a joint account holder.  They would need to be listed as a beneficiary, and upon the passing of the primary account holder would then include the balance as taxable income minus any eligible medical expenses incurred by the primary account holder 1 year prior to their passing as described in the death benefits section above.

Questions or Comments?

This is a great example of a fantastic question posed to us by an account holder.  We were happy to chase the official answers down for clarification, as well as sharing them here for the benefit of others.  If you have any questions or comments as to what topics you'd like us to cover we're always looking for suggestions!  Simply contact our office and let us know, and we'll get it posted!

Thank you for reading, and whether your a current account holder or not we look forward to our next opportunity to serve your needs.  Have a fantastic day!

Posted by idahomsa at 4/24/2017 7:27:00 PM
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