From the October 2012 issue of the AARP Bulletin, this outrage:

Carol and Paul Kurland of Leavittown, PA, both in their late 80’s, added their daughter’s name to their bank accounts to allow her access to funds if they faced a sudden health crisis. “Given our advanced age, we thought it was a good idea,” Carol Kurland says. “But we fell into a trap.” Sadly, their daughter Amy, 56, died last October. Two months later, the Kurlands got hit with a tax bill for several thousand dollars. They were amazed to discover that, under Pennsylvania law, a third of the money in their accounts was considered to be Amy’s. They had “inherited” it and now owed 4.5% as tax. “Our daughter had none of her own money in the accounts,” says Kurland, “and in fact, had never even visited that bank. The Pennsylvania Department of Revenue says it regularly hears from unhappy people in similar situations. Banks in the state are not required to inform customers who add names to accounts that they’ll owe taxes if the new person dies first.

Six other states – Indiana, Iowa, Kentucky, Maryland, Nebraska, and New Jersey – also tax inheritances. Four of them – Iowa, Kentucky, Maryland, and New Jersey – exempt parents of decedents, according to Jonathan Griffin at the National Conference of State Legislatures.

After the Kurlands’ tax bill arived, bank officials suggested that granting their daughter a power of attorney could have averted the liability.

“Why didn’t they tell us this before?” asks Carol Kurland. “You lose your daughter, and then you have to go through this. It’s been a bear.”

Takeaways:

1. If you live in Pennsylvania or the above-mentioned states, be aware of the potential for government thuggery if you add a person to a bank account and that individual passes away before you do.
2. Ask all the questions you can think of any time you deal with a bank. They have no vested interest in serving you – they only care about churning your worthless assets into valuable fees and commissions. Better yet, move your funds to a credit union, which at this point in time are still a better bet for consumers.
3. Write your legislators and demand that banks be required to divulge all information pertaining to tax law that touches their sphere of influence. You may also want to tell them that laws like this are the pinnacle of stupidity, and that you’re ready to vote your opinion.

The Old Wolf has spoken.