- My Forums
- Tiger Rant
- LSU Recruiting
- SEC Rant
- Saints Talk
- Pelicans Talk
- More Sports Board
- Fantasy Sports
- Golf Board
- Soccer Board
- O-T Lounge
- Tech Board
- Home/Garden Board
- Outdoor Board
- Health/Fitness Board
- Movie/TV Board
- Book Board
- Music Board
- Political Talk
- Money Talk
- Fark Board
- Gaming Board
- Travel Board
- Food/Drink Board
- Ticket Exchange
- TD Help Board
Customize My Forums- View All Forums
- Show Left Links
- Topic Sort Options
- Trending Topics
- Recent Topics
- Active Topics
Started By
Message
Can someone explain the “ins and outs” of inheritance tax for me?
Posted on 12/10/15 at 8:59 am
Posted on 12/10/15 at 8:59 am
Long story short, my wife is terrible with money and her parents’ (2 money dumb daughters) and uncle’s (no kids) wills have made me in charge of the finances upon their demise. They have plenty of years left, but it still made me relatively nervous. I will definitely use financial advisor when the time comes, but for now I am just curious what part the government will take.
I’ll use hypothetical round numbers.
Say we get $100,000 from her uncle. How much would the government take? Is there any way to shelter that money from taxes? Reinvest maybe?
Say we get her parents’ house that is worth $400,000 and paid off. What would we owe? Just property taxes? Could I sell the house with just standard taxes or would inheritance tax come into play there as well?
4
Posted on 12/10/15 at 9:18 am to TheCaterpillar
1. Talk to a estate/succession attorney when they die.
2. The federal estate tax limit is 5.45 million for 2016. As long as the value of their estate is not over that limit, there is no federal estate tax.
3. If in Louisiana, Louisiana does not have an state inheritance tax. If in another state, see No.1.
Edit to add: Also, your wife will get a stepped up basis on the house. For instance, if the parent's bought the house 10 years ago for $300,000, and it is $400,000 when they die, her basis on the property will be $400,000, so then if you sell for $420,000, you will only pay taxes on $20,000 (not $120,000).
2. The federal estate tax limit is 5.45 million for 2016. As long as the value of their estate is not over that limit, there is no federal estate tax.
3. If in Louisiana, Louisiana does not have an state inheritance tax. If in another state, see No.1.
Edit to add: Also, your wife will get a stepped up basis on the house. For instance, if the parent's bought the house 10 years ago for $300,000, and it is $400,000 when they die, her basis on the property will be $400,000, so then if you sell for $420,000, you will only pay taxes on $20,000 (not $120,000).
This post was edited on 12/10/15 at 9:24 am
Posted on 12/10/15 at 9:18 am to TheCaterpillar
Estate taxes (paid by the estate to the fed gov't) are different from inheritance taxes (paid by the inheritor to the state, not feds). Not all states have an inheritance tax. Where you live matters.
Regarding an inherited house, that's slightly more complicated. Will you hold onto the house and live in it for at least two years? If so, proceeds from the sale may be tax free (subject to limits). On the other hand, if you sell it without living in it, you may owe capital gains on the profit (or take a loss), with the basis being the fair market value on the day the person leaving it to you died.
Also very good to remember: in LA, a community property state, an inheritance is separate property. Which means you have no legal right to your wife's inherited funds.
Regarding an inherited house, that's slightly more complicated. Will you hold onto the house and live in it for at least two years? If so, proceeds from the sale may be tax free (subject to limits). On the other hand, if you sell it without living in it, you may owe capital gains on the profit (or take a loss), with the basis being the fair market value on the day the person leaving it to you died.
Also very good to remember: in LA, a community property state, an inheritance is separate property. Which means you have no legal right to your wife's inherited funds.
Posted on 12/10/15 at 9:19 am to TheCaterpillar
On a federal level, the estate tax is assessed on the estate (i.e. before assets get to the heirs). You can leave after you die / gift while alive over 5 million per person, plus an unlimited amount to your spouse (plus an unlimited amount of smaller gifts over your life). Odds are unless your wife's family is loaded, this will not be an issue.
A few states have their own estate tax or an inheritance tax (a tax on the assets in the hands of the heirs). Most southern states have neither, Louisiana nor Texas does.
When someone dies, their basis in their ownership of the assets "steps" to the FMV of the asset at the time of death. Any income from the asset (such as dividends) is taxable just like regular income.
In the case of the house, when you get the house at death, your basis is 400K. If you sold it, you would pay capital gains tax on the gain using 400K as a basis. (assuming you didn't personally live in it after getting it before you sold it)
A few states have their own estate tax or an inheritance tax (a tax on the assets in the hands of the heirs). Most southern states have neither, Louisiana nor Texas does.
When someone dies, their basis in their ownership of the assets "steps" to the FMV of the asset at the time of death. Any income from the asset (such as dividends) is taxable just like regular income.
In the case of the house, when you get the house at death, your basis is 400K. If you sold it, you would pay capital gains tax on the gain using 400K as a basis. (assuming you didn't personally live in it after getting it before you sold it)
Posted on 12/11/15 at 6:12 am to TheCaterpillar
quote:
Say we get her parents’ house that is worth $400,000 and paid off. What would we owe? Just property taxes? Could I sell the house with just standard taxes or would inheritance tax come into play there as well?
Others have given more in depth answers, but the only thing you should owe is state taxes. As long as you are below the $5m mark, the feds don't care.
Yes, you can sell the house or any other assets (stocks) without paying the short term gains penalty of you only owning the assets for a short period of time. When you file your taxes, your CPA should put down that it was an inheritance as the acquisition date and there shouldn't be any penalty.
Page 1 of 1
Popular
Back to top
Follow TigerDroppings for LSU Football News