Shackleford

iTrader: (12)

My Dad was left in the will of a man to whom he was not related. The man died last year.

Simply put, what percentage will my Dad have to fork over to the government? We have no idea how much it will be, either.

Hopefully, I'll be able to upgrade to an LS1 SS.

Blue's_Z28

iTrader: (2)

Roughly, depending on the value of said assets in the will, the gov't is gonna take 50%. Possibly even more. See a lawyer about it, ASAP.

Shackleford

iTrader: (12)

50%?!?!?!?!

BigRon77

iTrader: (1)

There is no "inheritance tax" either Federal or State (TX). Typically the estate of the decedent will pay the tax, if any, on an estate (i.e. you get it tax free). In some very special cases, if you receive certain types of property and sell it, you may owe tax...but probably nothing in this situation. Your Dad will also not pay regular income tax on the inheritance money.

Go LS1 crazy!

BigRon77

iTrader: (1)

To expand on my earlier post and to clear up the guy that posted 50%...the income tax rate for an estate is 40%. An estate worth less than the credit will pay nothing...which I believe is around $400,000 (single) and $800,000 (unified credit for husband and wife). This is what that poster is referring too, but it's not as simple as 50% or any rate for that matter. You have to account for the credit first.

If the will so provides, then the bequest to your Dad may be some amount net of his pro rata share of taxes...depends on how the will is written, but typically the bequests are made in whole (tax free after estate taxes). Even though the man is dead, his assets may continue to make income (interest, etc.), and that is taxed at the 40% rate.

I'm a CPA and attorney. Although, I do not practice estate tax law anymore.

Blue's_Z28

iTrader: (2)

That's why I said "Roughly...50%". But thanks for clearing it up.

Also, that being said, when I was married my wife was set to inherit a fortune from her grandfather. His CPA was pusing him to divest his assets before he died or "pay out half of it to the gov't." Why would his CPA say that?

BigRon77

iTrader: (1)

The tax paid on an estate is paid by the decedent...not the person receiving the money, as that CPA stated. Divesting his assets was the CPA's way of telling him to gift the money during his life under the taxable limit ($10,000/year per person to as many people as desired...which is now $12,000/year) to reduce his estate prior to death as much as possible to avoid the estate taxes.

If the amount of the estate was in excess of the unified credit...used to be $650,000, and tax law is increasing it to $1,000,000 over the next few years (I believe it's at the $800,000 level now)...then amounts over the credit amount is subject to up to a 55% tax (depending on amount of estate, etc.).

In this case, he's asking as recipient of the money, and no tax comes into play (unless specifically stated in the will). Also, in TX, inheritance is owned by the spouse as separate property...even if received while married, not community property!

Hope that's kinda clear.

Blue's_Z28

iTrader: (2)

Actually, yes it is. It makes total sense given the value of his assets (well over $2 million). Thanks for taking the time to go over that.

BigRon77

iTrader: (1)

Not a problem. Don't mind helping forum members when I can. When most people find out I'm a lawyer, it usually turns straight to "can you get me out of this ticket?"

That, I don't do. If it's a corporate/contract issue...I'm the man!

Blue's_Z28

iTrader: (2)

Wanna take over Enron? I hear we would could do it very cheaply! Hehehe

BigRon77

iTrader: (1)

Oddly enough, I worked for one of the firms involved in that mess, although not on the Enron deals. Let's just say I'm relieved...although the Feds did take the hard drive out of my computer during the investigations. I literally worked 6 hours on one file that had basically nothing to do with anything.

Whew!

Shackleford, if you have any specific questions, PM me. You really don't need a lawyer in this situation, as you basically will get what you will get. If the lawyer/cpa handling the will says differently, then you may want to get somebody to look at it.

Shackleford

iTrader: (12)

All right. Cool. Thanks, man. I'll probably hit you as we find out more information. The man's widow just sold the company to an old friend, actually that my Dad knows, too. He's taken care of my Dad ever since he took over the company - nicer company truck, $3 raise, etc. I think the entire amount of the business, land, and so forth was around $15-16 million. I'm hoping my Dad will receive quite a bit, as I believe he deserves it.

Btw, I have my eye on a '02 SOM SS for sale currently on the forum. Man, would I love to have that car. Haha. Dad wants an H2.

mitchntx

iTrader: (14)

Good advice ...

However, there are a few caveats to "gifting" ...

If a person divests themselves of all assets and then applies for Medicaid relief, the DHS will research back as far as they see fit.

Anything "gifted" or the proceeds thereof can be seized. **edit** if outside the guidelines **edit**

I just went through this with my mom. It's a mess to decipher all these laws and caveats.

BigRon77

iTrader: (1)

That is a good point. I will add the caveat that I am assuming the people mentioned here would not be in a Medicaid situation, as I assume the amounts are considerable and the giftor is dead, so not an issue. However, your Dad may consider this if he tries to gift everything over to you at some point.

As mitch states, if that is ever a concern to anyone trying to get Medicaid, they really are bastards and will try to prove that any assets gifted for up to 3 years prior by law (longer if they assert fraud) was an attempt to fake eligibility.

I hope you got the deal with your Mom straight...I'm in the middle of a similar bout with my Grandmother, and it may be the most frustrating thing I've ever done (and that says a lot based on the crap I've seen over the years).

Shackleford, because there is a widow and she will receive the remainder of the estate, the credit will go to her. I would be very surprised in this situation if your Dad would owe any tax on any gift he receives under the will.

mitchntx

iTrader: (14)

Yes, I got it straightened out ... for now. But only at the advice of an attorney.

I know it's going on a tangent, but as an example of a "mess" ...

A medicaid eligible person is allowed to keep a homestead, a car and personal items like clothing and furniture.

To become medicaid eligible, all "liquid" assets have to be spent down to less than $2000 and have a monthly income of less that $1700 (IIRC).

Now, how is a person supposed to be able to maintain a homestead and a car and survive on $1700/month?

The car ... my mom has been blind since 1993. My stepfather (died in December) was the licensed driver and had the insurance. When he passed, mom got sole possession of the car, an exempt asset (we need the car to ferry her around. she can't get into my 2500HD).

State of Texas won't allow a non-licensed driver to be insured. We sell the car, it's an asset (fair market value, not sales price) that DHS wants accounting for.

Catch 22 ...

Answer? we retitled the car and it is now co-owned by my mom and my wife. I would have never considered doing that ... didn't really know you couild ....

Sorry for the tangent. But the practical side of dealing with the death of a mom or dad takes away from the grieving one needs to do.

Lesson? Get your estate in order NOW! You are NEVER too young ....