Tennessee Inheritance Tax – Is jointly held property considered part of the decedent’s taxable estate under Tennessee law?

Under Tennessee law, jointly held property can be considered part of the deceased individual’s taxable estate.  T.C.A. § 67-8-305 discusses property transfers that occur upon someone’s death by right of survivorship (often under tenants by the entirety or tenancy by the entirety) or any payable on death accounts including joint accounts held in multiple people’s names.  Under T.C.A. § 67-8-305, if such transfers occur between husband and wife at the death of the decedent then only one half of the value of the account or property is considered a taxable transfer.  However, if the accounts or property are owned jointly by individuals who are not husband and wife then the “entire value of any such property shall be deemed to have been transferred from the decedent to the survivor” and therefore is subject to the Tennessee inheritance tax. 

Additionally, under subsection (a)(2) if the survivor who inherits from the decedent who had a joint account or owned joint property with the decedent actually contributed money towards the account or purchase, then that amount is deducted from the value that is considered to be part of the taxable estate.  In other words, if the survivor deposited money in the bank account or paid for part of the property that was jointly held, then that amount will reduce the taxable estate of the decedent.

T.C.A. § 67-8-305 provides in its entirety as follows:

(a) Whenever any property was held jointly by the decedent and one (1) or more persons as tenants by the entirety or otherwise, or was deposited in banks or other depositories or institutions in the joint names of the decedent and one (1) or more other persons and was payable to one (1) or more, or to the survivor or survivors, so that, upon the death of the decedent, the survivor or survivors became entitled to the immediate possession, ownership or enjoyment of such property, the entire value of any such property shall be deemed to have been transferred from the decedent to the survivor or survivors, and such transfer shall be subject to the inheritance tax imposed by parts 3-5 of this chapter, except:

(1) Where the decedent and the survivor are husband and wife at the death of the decedent, there shall be deducted one half ( ½ ) of the value of the taxable transfer; and

(2) In all other cases:

(A) Where such property was originally acquired for an adequate and full consideration in money or money's worth and where it is clearly shown to the satisfaction of the commissioner of revenue that the survivor or survivors contributed a part of the consideration given for such property in money or money's worth, there shall be deducted only such part of the value of the taxable transfer as is proportionate to the consideration contributed by the survivor or survivors; and

(B) Where the decedent and the survivor or survivors originally acquired such property other than for an adequate and full consideration in money or money's worth, there shall be deducted only such fractional part from the value of the taxable transfer as was originally acquired by the survivor or survivors.

(b) Where the decedent was a resident of this state, this section shall apply to the property specified in § 67-8-303(a)(1), or where the decedent was a nonresident, to the property specified in § 67-8-303(a)(2).