UPDATED pg 2: Tax questions re: deceased family member

[moneymom]

I have an appoint with our tax advisor first thing tomorrow.  I am going alone and not quite sure what to ask.  Here's what I've got:

- filing final taxes (do we need to wait until year end?)
- Past taxes (she probably hasn't filed in a few years but I'm not sure she needed to - they need to check on this)
- Taxes for the house.  We inherited 1/2 and just sold it.  Since DH's name was on the house (he wasn't aware until she died) Lawyer didn't really know how we should handle that legally since we didn't live there and it should have been inherited.  This is HUGE as we could owe tens of thousands in taxes.  
- I made an error in our Roth IRA contributions last year.  I contributed to DH's not realizing he was highly compensated that year and as soon as I realized it (on 4/20), I withdrew the excess.  However I couldn't get through Fidelity tax helpline to find out how to do it right.. not sure if I need to do anything?

Any other questions I should ask him?  I'd love tax sheltering advice but I've asked before and he brushed it off.  I think it's because it's a separate service that I'd have to pay for.  

Any input is appreciated!  I'm stressed out going to this appointment on my own. 

[moneymaven]

So why are you going alone? Why do you take all this on without the help of your DH? Not judging, just trying to better understand. You take on a lot.

[Bonny]

1 If there's no income for the estate there's no need to wait until year end. Are all the bank accounts closed? I guess there's always a risk that a forgotten 1099 could show up but most banks won't even produce a 1099 unless there's at least $100 of income.

2 Past taxes; if she was low enough income, say <$12k/yr she wouldn't need to file a tax return.

3. Who inherited the other half of the house? Did escrow do withholding?

4. Can't address the ROTH issue. Don't know enough.

[ArchietheDragon]

calling real estate lawyer...  swamp   

[moneymom]

Oct 27, 2015 9:35:15 GMT -5 Bonny said:

1 If there's no income for the estate there's no need to wait until year end. Are all the bank accounts closed? I guess there's always a risk that a forgotten 1099 could show up but most banks won't even produce a 1099 unless there's at least $100 of income.

2 Past taxes; if she was low enough income, say <$12k/yr she wouldn't need to file a tax return.

3. Who inherited the other half of the house? Did escrow do withholding?

4. Can't address the ROTH issue. Don't know enough.

1. She had approx. $1000 monthly social security, and $450/month from inherited pension.
2. see above, does SS count??
3. a relative.  Completing real estate withholding paperwork today with tax advisor.

[moneymom]

Oct 27, 2015 9:07:00 GMT -5 moneymaven said:

So why are you going alone? Why do you take all this on without the help of your DH? Not judging, just trying to better understand. You take on a lot.

I'm not working.  DH has a very demanding job.  The person who inherited the other half doesn't reside in the US and also has an insane schedule.  It would never get done if I didn't take it on.  

[moneymom]

Why does it show "Infected" under each members name??

[swamp]

Oct 27, 2015 9:41:48 GMT -5 ArchietheDragon said:

calling real estate lawyer...  swamp   

I'm a lawyer, not an accountant.

But, she takes it at the previous owners cost basis and will owe capital gains on the sale.   It is my understanding that if they keep the house, there will not be any recogniziable gain until there is a sale.

But I don't really get the bitching about capital gains tax.  Someone gave you a house.  Pay the damn capital gains taxes on the sale.  It's money that wasn't yours to begin with.

[ArchietheDragon]

Oct 27, 2015 10:07:35 GMT -5 swamp said:

Oct 27, 2015 9:41:48 GMT -5 ArchietheDragon said:

calling real estate lawyer...  swamp   

I'm a lawyer, not an accountant.

This is the biggest nut in the whole thing. 


"Since DH's name was on the house (he wasn't aware until she died) Lawyer didn't really know how we should handle that legally since we didn't live there and it should have been inherited. This is HUGE as we could owe tens of thousands in taxes."

Did he actually inherit a house or did he simply continue to own a house that he already owned?

[Wisconsin Beth]

Oct 27, 2015 9:53:31 GMT -5 moneymom said:

Why does it show "Infected" under each members name??

The Annual Fall/Halloween Zombie game! 

Someone bit you and turned you into a Zombie.  You can now bite 2 people every hour until the board is overrun with Zombies or the Solders (they shoot the Zombies) and the Scientists (they cure the Zombies) make it safe once more. 

Sometimes people die from a Zombie bite or from an attempt to cure them.  So after you're dead 30 minutes, you can respawn and wait to be bit again. 

[swamp]

Oct 27, 2015 10:09:16 GMT -5 ArchietheDragon said:

Oct 27, 2015 10:07:35 GMT -5 swamp said:

I'm a lawyer, not an accountant.

This is the biggest nut in the whole thing. 


"Since DH's name was on the house (he wasn't aware until she died) Lawyer didn't really know how we should handle that legally since we didn't live there and it should have been inherited. This is HUGE as we could owe tens of thousands in taxes."

Did he actually inherit a house or did he simply continue to own a house that he already owned?

It depends on how he held title.

[TheHaitian]

Oct 27, 2015 10:10:30 GMT -5 swamp said:

Oct 27, 2015 10:09:16 GMT -5 ArchietheDragon said:

This is the biggest nut in the whole thing. 


"Since DH's name was on the house (he wasn't aware until she died) Lawyer didn't really know how we should handle that legally since we didn't live there and it should have been inherited. This is HUGE as we could owe tens of thousands in taxes."

Did he actually inherit a house or did he simply continue to own a house that he already owned?

It depends on how he held title.

Or maybe the mother did the poor man's way of bypassing probate:
-> add her son to the title giving him ownership of the house.

[The Captain]

mwcpa may be able to assist as well.

[ArchietheDragon]

Oct 27, 2015 10:10:30 GMT -5 swamp said:

Oct 27, 2015 10:09:16 GMT -5 ArchietheDragon said:

This is the biggest nut in the whole thing. 


"Since DH's name was on the house (he wasn't aware until she died) Lawyer didn't really know how we should handle that legally since we didn't live there and it should have been inherited. This is HUGE as we could owe tens of thousands in taxes."

Did he actually inherit a house or did he simply continue to own a house that he already owned?

It depends on how he held title.

moneymom   This is the big question, and as you noted, it will make a huge difference on the tax liability from the sale of the house.  Do you know how the house was titled? 

[moneymom]

Oct 27, 2015 10:07:35 GMT -5 swamp said:

Oct 27, 2015 9:41:48 GMT -5 ArchietheDragon said:

calling real estate lawyer...  swamp   

I'm a lawyer, not an accountant.

But, she takes it at the previous owners cost basis and will owe capital gains on the sale.   It is my understanding that if they keep the house, there will not be any recogniziable gain until there is a sale.

But I don't really get the bitching about capital gains tax.  Someone gave you a house.  Pay the damn capital gains taxes on the sale.  It's money that wasn't yours to begin with.

Thanks!  I assume we'd have to pay it?  House is being sold, in escrow.  Does it matter that DH lived in it until he turned 18?  Does that change the cost basis?

[moneymom]

Oct 27, 2015 10:09:16 GMT -5 ArchietheDragon said:

Oct 27, 2015 10:07:35 GMT -5 swamp said:

I'm a lawyer, not an accountant.

This is the biggest nut in the whole thing. 


"Since DH's name was on the house (he wasn't aware until she died) Lawyer didn't really know how we should handle that legally since we didn't live there and it should have been inherited. This is HUGE as we could owe tens of thousands in taxes."

Did he actually inherit a house or did he simply continue to own a house that he already owned?

He continued to own (he didn't know he was on title until she passed though).  But when MIL died, he inherited her 1/3rd portion, right?  

[swamp]

Oct 27, 2015 10:17:55 GMT -5 moneymom said:

Oct 27, 2015 10:07:35 GMT -5 swamp said:

I'm a lawyer, not an accountant.

But, she takes it at the previous owners cost basis and will owe capital gains on the sale.   It is my understanding that if they keep the house, there will not be any recogniziable gain until there is a sale.

But I don't really get the bitching about capital gains tax.  Someone gave you a house.  Pay the damn capital gains taxes on the sale.  It's money that wasn't yours to begin with.

Thanks!  I assume we'd have to pay it?  House is being sold, in escrow.  Does it matter that DH lived in it until he turned 18?  Does that change the cost basis?

No.

No. What matters is when and how he took title.

[moneymom]

Oct 27, 2015 10:09:56 GMT -5 Wisconsin Beth said:

Oct 27, 2015 9:53:31 GMT -5 moneymom said:

Why does it show "Infected" under each members name??

The Annual Fall/Halloween Zombie game! 

Someone bit you and turned you into a Zombie.  You can now bite 2 people every hour until the board is overrun with Zombies or the Solders (they shoot the Zombies) and the Scientists (they cure the Zombies) make it safe once more. 

Sometimes people die from a Zombie bite or from an attempt to cure them.  So after you're dead 30 minutes, you can respawn and wait to be bit again. 

omg... I"m sorry I asked.. LOL!!  At least my computer isn't infected LOL.  I thought I had a virus!

[swamp]

Oct 27, 2015 10:20:27 GMT -5 moneymom said:

Oct 27, 2015 10:09:16 GMT -5 ArchietheDragon said:

This is the biggest nut in the whole thing. 


"Since DH's name was on the house (he wasn't aware until she died) Lawyer didn't really know how we should handle that legally since we didn't live there and it should have been inherited. This is HUGE as we could owe tens of thousands in taxes."

Did he actually inherit a house or did he simply continue to own a house that he already owned?

He continued to own (he didn't know he was on title until she passed though).  But when MIL died, he inherited her 1/3rd portion, right?  

Not necessarily.   Depends on how title was held, and what the will said if the deed did not provide for what happens after her death.

[moneymom]

Oct 27, 2015 10:20:40 GMT -5 swamp said:

Oct 27, 2015 10:17:55 GMT -5 moneymom said:

Thanks!  I assume we'd have to pay it?  House is being sold, in escrow.  Does it matter that DH lived in it until he turned 18?  Does that change the cost basis?

No.

No. What matters is when and how he took title.

I just realized he took title when he was 21.  So I guess that helps a bit?  (Not trying to avoid taxes LOL)

[ArchietheDragon]

Oct 27, 2015 10:20:27 GMT -5 moneymom said:

Oct 27, 2015 10:09:16 GMT -5 ArchietheDragon said:

This is the biggest nut in the whole thing. 


"Since DH's name was on the house (he wasn't aware until she died) Lawyer didn't really know how we should handle that legally since we didn't live there and it should have been inherited. This is HUGE as we could owe tens of thousands in taxes."

Did he actually inherit a house or did he simply continue to own a house that he already owned?

He continued to own (he didn't know he was on title until she passed though).  But when MIL died, he inherited her 1/3rd portion, right?  

Was he joint owner or tenant in common or something else?  The answer depends....


If he was a joint owner, he owned 100% of the house jointly with the other joint owners.   If he was a tenant in common then he only owned his share and the mother's share was inherited as described in her will or through probate. 

[ArchietheDragon]

Oct 27, 2015 10:22:43 GMT -5 moneymom said:

Oct 27, 2015 10:20:40 GMT -5 swamp said:

No.

No. What matters is when and how he took title.

I just realized he took title when he was 21.  So I guess that helps a bit?  (Not trying to avoid taxes LOL)

No.  That doesn't help. 

[moneymom]

I'll report back after appoint.  I really appreciate the input.  It gives me discussion points for my appoint

[moneymom]

Oct 27, 2015 10:23:30 GMT -5 ArchietheDragon said:

Oct 27, 2015 10:20:27 GMT -5 moneymom said:

He continued to own (he didn't know he was on title until she passed though).  But when MIL died, he inherited her 1/3rd portion, right?  

Was he joint owner or tenant in common or something else?  The answer depends....


If he was a joint owner, he owned 100% of the house jointly with the other joint owners.   If he was a tenant in common then he only owned his share and the mother's share was inherited as described in her will or through probate. 

Joint tenancy

[moneymom]

Oct 27, 2015 10:23:59 GMT -5 ArchietheDragon said:

Oct 27, 2015 10:22:43 GMT -5 moneymom said:

I just realized he took title when he was 21.  So I guess that helps a bit?  (Not trying to avoid taxes LOL)

No.  That doesn't help. 

ohh, because house was valued more then, right?  ok..  thank god this will be done today!

[The Captain]

Oct 27, 2015 10:07:35 GMT -5 swamp said:

Oct 27, 2015 9:41:48 GMT -5 ArchietheDragon said:

calling real estate lawyer...  swamp   

I'm a lawyer, not an accountant.

But, she takes it at the previous owners cost basis and will owe capital gains on the sale.   It is my understanding that if they keep the house, there will not be any recogniziable gain until there is a sale.

But I don't really get the bitching about capital gains tax.  Someone gave you a house.  Pay the damn capital gains taxes on the sale.  It's money that wasn't yours to begin with.

Swamp - I get where you're coming from. But if the house had been inherited free and clear the estate exemption would have (I believe) shielded any gains from taxation to the heirs.

Since half the house was in the husband's name, I'm going to say he'll have to pay some capital gains tax -which (ugg) could be a LOT if he has zero basis in the property.

I'm corporate tax, not individual so I'm not 100% sure on this but mention it because this is an area which I've heard gets messed up a lot in amateur estate planning.

[ArchietheDragon]

Oct 27, 2015 10:25:23 GMT -5 moneymom said:

Oct 27, 2015 10:23:30 GMT -5 ArchietheDragon said:

Was he joint owner or tenant in common or something else?  The answer depends....


If he was a joint owner, he owned 100% of the house jointly with the other joint owners.   If he was a tenant in common then he only owned his share and the mother's share was inherited as described in her will or through probate. 

Joint tenancy

Was anyone else a joint tenant owner?

[swamp]

Oct 27, 2015 10:29:05 GMT -5 The Captain said:

Oct 27, 2015 10:07:35 GMT -5 swamp said:

I'm a lawyer, not an accountant.

But, she takes it at the previous owners cost basis and will owe capital gains on the sale.   It is my understanding that if they keep the house, there will not be any recogniziable gain until there is a sale.

But I don't really get the bitching about capital gains tax.  Someone gave you a house.  Pay the damn capital gains taxes on the sale.  It's money that wasn't yours to begin with.

Swamp - I get where you're coming from. But if the house had been inherited free and clear the estate exemption would have (I believe) shielded any gains from taxation to the heirs.

Since half the house was in the husband's name, I'm going to say he'll have to pay some capital gains tax -which (ugg) could be a LOT if he has zero basis in the property.

I'm corporate tax, not individual so I'm not 100% sure on this but mention it because this is an area which I've heard gets messed up a lot in amateur estate planning.

You're absolutely right on something inherited thru probate is usually tax free.   However, it is then subject to creditors' claims and probate fees, so you may not inherit anything.

I just have a real issue about people bitching about taxes on something they inherited. 

[moneymom]

Oct 27, 2015 10:30:23 GMT -5 ArchietheDragon said:

Oct 27, 2015 10:25:23 GMT -5 moneymom said:

Joint tenancy

Was anyone else a joint tenant owner?

The deed has three owners.  MIL (who should be removed by now through escrow), DH, and relative.

[milee]

Oct 27, 2015 11:12:22 GMT -5 moneymom said:

Oct 27, 2015 10:30:23 GMT -5 ArchietheDragon said:

Was anyone else a joint tenant owner?

The deed has three owners.  MIL (who should be removed by now through escrow), DH, and relative.

Archie is asking not the names or number of owners but for the language that describes the ownership.

Get out the deed and read the language. The language describes what type of owner each one is.