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inheritance question
Posted on 9/14/15 at 12:37 pm
Posted on 9/14/15 at 12:37 pm
My parents will be getting a decent inheritance from my grandmother who passed last month. The total is under a million for their share. What should he expect in taxes and what are his options to mitigate any tax burden?
He is less than 2 years from retirement @ $100+/ year salary. 401k is in pretty good shape. Mom already on SS.
The manager of my grandmother's account wants him to do an annuity.
Should he speak with a tax lawyer?
Shouldn't his current financial advisor be giving him some advice? Talked to my dad yesterday and he sounded confused.
He is less than 2 years from retirement @ $100+/ year salary. 401k is in pretty good shape. Mom already on SS.
The manager of my grandmother's account wants him to do an annuity.
Should he speak with a tax lawyer?
Shouldn't his current financial advisor be giving him some advice? Talked to my dad yesterday and he sounded confused.
6
Posted on 9/14/15 at 12:48 pm to PJMLSU
quote:
For the 2014 tax year, the estate tax exclusion amount is $5.34 million. It increases to $5.43 million for 2015. ATRA also increased the tax rate on estates in excess of the exemption amount from 35 percent to 40 percent.
So nothing owed.
quote:
Should he speak with a tax lawyer?
Probably
quote:
Shouldn't his current financial advisor be giving him some advice?
Yes as well
Posted on 9/14/15 at 12:59 pm to PJMLSU
quote:
The manager of my grandmother's account wants him to do an annuity.
I bet he does
Posted on 9/14/15 at 1:15 pm to I Love Bama
He is paying a gains tax if he takes the money out. But not if he rolls it into a new annuity that he can draw up $20000 a year from for 7 years. He is being told he would owe $30-$35000 in taxes if he just takes the money and does something else
Posted on 9/14/15 at 1:16 pm to PJMLSU
quote:
The manager of my grandmother's account wants him to do an annuity.
That leaves you and your siblings with nothing after your parents die. They get a big commission for selling those.
Posted on 9/14/15 at 1:27 pm to Layabout
quote:
That leaves you and your siblings with nothing after your parents die. They get a big commission for selling those
Explain please.
I'll be honest. My dad has worked his arse off for 40 years. No kiddin, has taken maybe 10 sick days in his life. I want him to enjoy every damn penny. But I don't want some salesmen ripping him off or taking advantage of him.
Posted on 9/14/15 at 2:32 pm to PJMLSU
If your grandmothers investment was already in an annuity then your father would be looking at some tax at the inheritance. If it was in an Ira and he cashes it out of the Ira then he will be looking at tax. If it was a regular non qualified brokerage account invested in stocks/bonds/mutual funds then it would hardly be any tax.
There's a lot of questions to be answered here and he should consult with his financial advisor on the matter. I would be very very cautious to drop close to 1 mill into an annuity. Wow that would be a pay day for someone. Most certainly go talk to a couple other advisors if that's the advice he received.
There's a lot of questions to be answered here and he should consult with his financial advisor on the matter. I would be very very cautious to drop close to 1 mill into an annuity. Wow that would be a pay day for someone. Most certainly go talk to a couple other advisors if that's the advice he received.
Posted on 9/14/15 at 2:32 pm to PJMLSU
First off, sorry for your loss.
Assuming you parents are in LA, there will be no tax on them for the inheritance. Now, depending on what assets are inherited, if any of those assets produce income, then the income from those assets will be taxable to your parents after the transfer of assets is complete. Example, if corporate stock is transferred, then dividends after transfer are taxable to your parents (and they get the cash too). Also if any assets are liquidated after transfer, including IRAs, annuities, etc - there may be income tax due.
The estate may have some taxable income from the Date of Death to the time the heirs are put in possession of the assets. This may necessitate the estate filing a income tax return. Depending on the circumstances, your parents may get a K-1 from the estate, which may require them to pick up a portion of the estate's income on their personal tax return.
I would be very careful with an annuity at that age, especially if 401K/SS will be enough to replace most income.
I don't think there is a need to speak to a tax lawyer. He may need to work with a CPA if he gets a K-1 from the estate as mentioned above.
It sounds like he will need some financial advice on what to do with the inheritance.
Assuming you parents are in LA, there will be no tax on them for the inheritance. Now, depending on what assets are inherited, if any of those assets produce income, then the income from those assets will be taxable to your parents after the transfer of assets is complete. Example, if corporate stock is transferred, then dividends after transfer are taxable to your parents (and they get the cash too). Also if any assets are liquidated after transfer, including IRAs, annuities, etc - there may be income tax due.
The estate may have some taxable income from the Date of Death to the time the heirs are put in possession of the assets. This may necessitate the estate filing a income tax return. Depending on the circumstances, your parents may get a K-1 from the estate, which may require them to pick up a portion of the estate's income on their personal tax return.
I would be very careful with an annuity at that age, especially if 401K/SS will be enough to replace most income.
I don't think there is a need to speak to a tax lawyer. He may need to work with a CPA if he gets a K-1 from the estate as mentioned above.
It sounds like he will need some financial advice on what to do with the inheritance.
This post was edited on 9/14/15 at 2:34 pm
Posted on 9/14/15 at 2:49 pm to Shepherd88
I know at least half is coming from an annuity not sure about rest. He is meeting with his advisor on Wednesday.
At 64yo,is an annuity a terrible idea?
At 64yo,is an annuity a terrible idea?
Posted on 9/14/15 at 2:52 pm to Layabout
quote:
That leaves you and your siblings with nothing after your parents die.
While I'm not as fan of annuities this simply isn't true. There are plenty of annuities out there with survivor benefits.
quote:
Cash Refund
If you (and your joint annuitant, if applicable) die before the amount of your TSP balance used to purchase your annuity has been paid out, the remaining amount will be paid to your beneficiary, or beneficiaries, in a lump sum.
You can add this feature if you purchase a single life or a joint life annuity, and with level or increasing payments.
Posted on 9/14/15 at 3:00 pm to PJMLSU
In Louisiana it's not bc it's one vehicle that will allow the proceeds to bypass probate. But they are expensive and usually leave the beneficiary with a big tax bill.
However, The only time I ever use an annuity is for income and by calculating that clients reliance ratio. Meaning how much income do they need from their portfolio and how much is that client depending on this income. If that ratio is high it tells me they are more emotionally attached to their investments and will likely be at risk during volatile markets. By incorporating an annuity will tone down their reliance to that income bc it puts a guarantee on it from the insurance company.
Usually this is In a portfolio range a lot less than $1mill.
Don't take this as advice, that's why I and others are saying to go speak with another advisor closer who can look at the whole picture for your parents.
However, The only time I ever use an annuity is for income and by calculating that clients reliance ratio. Meaning how much income do they need from their portfolio and how much is that client depending on this income. If that ratio is high it tells me they are more emotionally attached to their investments and will likely be at risk during volatile markets. By incorporating an annuity will tone down their reliance to that income bc it puts a guarantee on it from the insurance company.
Usually this is In a portfolio range a lot less than $1mill.
Don't take this as advice, that's why I and others are saying to go speak with another advisor closer who can look at the whole picture for your parents.
Posted on 9/14/15 at 4:18 pm to Shepherd88
No annuity. Way better off elsewhere.
Posted on 9/15/15 at 10:19 am to PJMLSU
quote:
My parents will be getting a decent inheritance from my grandmother who passed last month. The total is under a million for their share.
Point of clarification: the inheritance isn't "their" share. In law, it is the separate property of the inheriting spouse. While it may seem like a subtle distinction, it is worth keeping in mind as you move forward.
And don't do an annuity. He's got his own decent retirement, why would he need the predictibility of an annuity contract? F that. Find a GOOD fee-based financial advisor (even if you have to drive a bit to find one) and lay out the whole financial scenario. He needs to ask himself all sorts of questions: does he want to preserve the principal for future generations? does he want to give to a charity or school that helped him (or your grandmother)? Etc. The fin advisor can't help you unless you provide some clear ideas on what you hope to accomplish with the inheritance.
Posted on 9/15/15 at 4:31 pm to hungryone
quote:
And don't do an annuity. He's got his own decent retirement, why would he need the predictibility of an annuity contract?
This makes sense to me. Something did not sound right, or at least their were better options available.
He is meeting with his financial advisor tomorrow so I am interested to see what comes of it.
Thanks for the help everyone. Will post later when the ball starts to roll
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