Seeking estate tax information

Nov 29, 2006
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My wife's mother passed away a few months ago and my wife is the executor of the estate. Her mother had quite a bit set aside to distribute evenly among her 3 daughters. It is going to probate court eventually but im not a tax savy person but i know some of you here are. I have a few questions on how receiving money from various means might affect my wife & I's taxes once its all said and done.

Her mothers house and car were paid off and she had various accounts with money in them. Checking, Roth IRA, IRA, 401K, i think even a few CDs, and then also the estate once the house, etc is sold. In total this is all less then $500k id imagine.

Can anyone shed some light on how receiving some money from the various things list might be taxed to us once we receive the funds?

Thanks

Edit: This is in KS if that helps any. Gill77 mentioned states made me think i should add this info.
 
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gill77

Senior member
Aug 3, 2006
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The feds have estate taxes with a 2019 exemption of $11M, so you should be ok there. Some states have estate and inheritance taxes. Good luck.
 

dasherHampton

Platinum Member
Jan 19, 2018
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When my parents passed their broker converted their IRA into a decedent IRA that was split between myself and my two siblings.

It continues to grow but has a RMD based on your age.
 
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zinfamous

No Lifer
Jul 12, 2006
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When my parents passed their broker converted their IRA into a decedent IRA that was split between myself and my two siblings.

It continues to grow but has a RMD based on your age.

Yeah, do this if it makes the most sense for you, OP. Other best option would be to take cash payout to payoff mortgage or whatever current debt if you think that is better for you at this time....but I'd keep that money growing if whatever interest rates you might have on debt now are relatively low.

As mentioned, you won't pay any federal income taxes on that, but you might pay that standard 15%? early withdrawal penalty if it is coming out of trIRA and 401k? Honestly not sure if that applies when inheriting account funds like this (I would assume it still applies...)
 

KeithP

Diamond Member
Jun 15, 2000
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Normally when opening retirement accounts, part of the process is naming beneficiaries for the accounts. Do you know if the IRAs and the 401K have beneficiaries named? If they do they won't go through probate. They get distributed to the beneficiaries right away.

Was your wife's mother over 70 1/2 and already taking distributions? If so then the beneficiaries will be required to start taking distributions. You will need to look into the various options.

-KeithP
 

Sgt. York

Senior member
Mar 27, 2016
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For a situation like this, would you consult an attorney or an accountant? It can get confusing for the average person.
 
Nov 29, 2006
15,692
4,204
136
Normally when opening retirement accounts, part of the process is naming beneficiaries for the accounts. Do you know if the IRAs and the 401K have beneficiaries named? If they do they won't go through probate. They get distributed to the beneficiaries right away.

Was your wife's mother over 70 1/2 and already taking distributions? If so then the beneficiaries will be required to start taking distributions. You will need to look into the various options.

-KeithP

Some accounts had beneficiaries listed (the 3 daughters), others didn't and are going thru probate. She was 78 when she passed and was taking distributions when she passed.
 

dasherHampton

Platinum Member
Jan 19, 2018
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For a situation like this, would you consult an attorney or an accountant? It can get confusing for the average person.

It obviously depends in the situation, but in our case we had both. The attorney, the accountant, and my parent's brokerage firm all sorted through the details.
 

Scarpozzi

Lifer
Jun 13, 2000
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The feds have estate taxes with a 2019 exemption of $11M, so you should be ok there. Some states have estate and inheritance taxes. Good luck.
I was pleased with the federal tax structure on this. They are somewhat reasonable with the way they handle it...considering I don't have a rich uncle. Both of my parents are living, but they recently transferred some property to me for safe keeping. I was somewhat worried about the tax implications, but was assured by our attorney we'd be ok. At tax time, I re-read everything and found that there was basically nothing we needed to do because it was so far below $11M and I'll likely get very little down the road from their estate.
 

gill77

Senior member
Aug 3, 2006
813
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I was pleased with the federal tax structure on this. They are somewhat reasonable with the way they handle it...considering I don't have a rich uncle. Both of my parents are living, but they recently transferred some property to me for safe keeping. I was somewhat worried about the tax implications, but was assured by our attorney we'd be ok. At tax time, I re-read everything and found that there was basically nothing we needed to do because it was so far below $11M and I'll likely get very little down the road from their estate.

Careful that those transfers are not subject to gift tax. $15K per year exemption.
 

Genx87

Lifer
Apr 8, 2002
41,091
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I was pleased with the federal tax structure on this. They are somewhat reasonable with the way they handle it...considering I don't have a rich uncle. Both of my parents are living, but they recently transferred some property to me for safe keeping. I was somewhat worried about the tax implications, but was assured by our attorney we'd be ok. At tax time, I re-read everything and found that there was basically nothing we needed to do because it was so far below $11M and I'll likely get very little down the road from their estate.

Also there may be claw back laws if your parents go on public assistance and burn through their existing assets. Something to remember if you end up selling the property and have cash in hand.
 

Scarpozzi

Lifer
Jun 13, 2000
26,389
1,778
126
Also there may be claw back laws if your parents go on public assistance and burn through their existing assets. Something to remember if you end up selling the property and have cash in hand.
The property won't be sold anytime soon. They likely won't go on public assistance due to their health. It's real estate and we did a quitclaim deed, so it's a done deal from what the lawyer told us.