Bonny
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Post by Bonny on Jan 25, 2018 17:54:45 GMT -5
I inherited part of my dad's IRA, and I have to take rmd' s out of it every year, since he was over 70.5 when he died. The first year's rmd was based on his age (probably because he hadn't taken that year's yet), and after it is based on mine. Actually, my DB and I split my dad's rmd requirement that year so my DS didn't need to until the following year based upon her age. Fidelity's website explained it all very well. Based on my 94 year old dad's current RMD, my sister and I will most likely inherit it. I know we will have income because of it. She even suggested having in take it all out at once. I asked her why should he pay taxes on a lump sum? That's the last time she has mentioned liquidating the IRA. Given your subsequent post, she may have assumed that his tax rate is lower than yours. Depending on the size of the account and if he doesn't need the money and it's invested in low yield instruments, she might be right that you two would be better off inheriting the money from a taxable account.
I'm sure you've done the math and know what option is best.
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TheOtherMe
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Post by TheOtherMe on Jan 25, 2018 20:01:25 GMT -5
He has been drawing on it since age 70.5. Mom's IRA was combined with his when she died. His RMD isn't large enough to require him to file a tax return when added to his Social Security and pension. He isn't wealthy. So it's estate planning for the lower middle class in our case. Sorry, I meant a sizable percentage. I had thought the tables basically zeroed out the account by 105, but I guess it's actually 115. He won't make it to 100, let alone 115.
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TheOtherMe
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Post by TheOtherMe on Jan 25, 2018 20:05:38 GMT -5
Based on my 94 year old dad's current RMD, my sister and I will most likely inherit it. I know we will have income because of it. She even suggested having in take it all out at once. I asked her why should he pay taxes on a lump sum? That's the last time she has mentioned liquidating the IRA. Given your subsequent post, she may have assumed that his tax rate is lower than yours. Depending on the size of the account and if he doesn't need the money and it's invested in low yield instruments, she might be right that you two would be better off inheriting the money from a taxable account.
I'm sure you've done the math and know what option is best.
My parents were risk adverse, as in their money was always in CDs and low earning IRAs. Best money they made was when they loaned BIL money for the farm and received interest. Note was based on interest at time of loan. Interest rates went down. BIL has paid all of the money back about 10 years ago or so. At this point, he doesn't pay taxes. It's sister and BIL who have the high tax rate--some years. I want to protect dad from paying taxes, not protect my sister and me from paying taxes. He doesn't need the money. He likes seeing another account with $$$ in it on his bank statement. I say let him enjoy his bank statements as long as he can. Should he need the money for a nursing home, yes, it will be liquidated to pay for that.
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NastyWoman
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Post by NastyWoman on Jan 25, 2018 20:11:30 GMT -5
Given that Shelby's dad only recently passed away, is it possible that the tax the financial advisor was talking about is her father's 2017 tax obligation? Nothing to do with the inheritance yet needing to be paid out of the estate before distributions?
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shelby
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Post by shelby on Jan 25, 2018 20:25:32 GMT -5
Sorry I shouldn't have said retirement accounts they are normal investment accounts
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shelby
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Post by shelby on Jan 25, 2018 20:52:04 GMT -5
I will talk to an account it is pretty complicated. Will I have to file his personal taxes and separate estate taxes? ETA I really dread this stuff.
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Bonny
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Post by Bonny on Jan 25, 2018 21:27:44 GMT -5
Sorry I shouldn't have said retirement accounts they are normal investment accounts Then in addition to the real estate related tax stuff, the estate will be reporting dividends, interest and possibly cap gains (if there are mutual funds).
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taz157
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Post by taz157 on Jan 25, 2018 21:28:03 GMT -5
I will talk to an account it is pretty complicated. Will I have to file his personal taxes and separate estate taxes? ETA I really dread this stuff. Yes. I would recommend you get a CPA that knows estate taxes and regular taxes. I think an accountant wouldn’t be the best use. A CPA with experience in estates would.
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Bonny
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Post by Bonny on Jan 25, 2018 21:28:45 GMT -5
I will talk to an account it is pretty complicated. Will I have to file his personal taxes and separate estate taxes? ETA I really dread this stuff. Did he die in 2017 or 2018?
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nittanycheme
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Post by nittanycheme on Jan 25, 2018 23:18:39 GMT -5
I am in PA, and my mom passed in 2016. This is how her estate worked, and what I had to pay out for what. I had to pay PA estate tax; her estate was way too small for federal estate tax. But PA doesn't have a minimum filing amount. They do charge estate tax based on the heir's relationship (numbers approximate): spouse 0%, direct family (parent or kids) 4.5%, other relative about 10%, non relative 15%. Some of the banks were NOT cooperative in releasing the money to the estate account, and required a lot of follow up. My mom had checking/savings at 2 banks, and investments with a 3rd. One bank was very easy - my lawyer sent the letter saying my mom had passed, with the "short form" showing I was executor, and asked for the account to be liquidated and paid out to the "estate of confusednittany's mom", and they just sent the check. The second bank required a bunch of follow up, and needed a notarized paper. The last one was also difficult. It may not have taken as long with them, but I could only deal with one difficult bank at a time. Me: executor and sole heir (my estate lawyer said that it made a difference in how I administered since I didn't really need to work with/get permission from anyone else, and I didn't need to file some sort of settlement paperwork that was about everyone agreeing to the disbursement) Estate in general: PA has an estate tax form where you need to list each of the assets, total them up, and pay the estate tax. Includes everything from household contents to checking/saving/investment accounts to possessions like car and house. PA lets you estimate the tax, and you get a 5% discount if you pay it within 3 months of death. The tax filing and payment is due within 9 months of the date of death - if its different than the estimate you just pay the difference or get a refund. I think you can get an extension, but I would've only needed it because I wanted to sell the house under the estate. I made it just in time. You want to set up an estate account to liquidate all the other accounts into, and pay bills out of. It makes it easier to consolidate and track, and if you are getting money out of a deceased person's account, they may freeze it. I had to file my mom's last tax return for federal and state, mark it deceased (this somehow confused turbotax, so I just filed them on paper). I didn't need to file one for the estate since it had less than $600 in "income". The income was the general appreciation between date of death, and end of the tax year. I'm glad that it wasn't over $600 - I could skip some paperwork. Assets: - Annuity - I have to pay taxes on my ordinary income tax on the difference between the payout and what my mom bought it for. I could either get a lump sum payout or separate it out over a couple of different year options. Main impact was around when I got the money, which relates to when I pay the tax. lump sum - pay it the tax year it was cashed in. Time payout - due each year you get a payout. The annuity company gave me the options, and i just filled out the paperwork with what I chose. They sent me a 1099R detailing what is taxed. I think this was also in the estate tax form, but I can't remember.
- Checking accounts/saving accounts, just in my mom's name - estate tax on the value on the date of death (which is extra annoying to get get from all these companies)
- Joint checking account between my mom and her housemate - estate tax on 1/2 the value on the date of death. Her housemate pays on the other half on his own - and he owes the higher amount
- Roth IRA - I just got that payout directly to me - no taxes!
- Investment account: estate tax on value on date of death. I liquidated it under the estate, although it took a while. They were NOT cooperative.
- House - I sold it as part of the estate. I didn't want it - its 2 hr away from where I live. If I didn't sell it before the estate closed, I would have had to have it appraised, attach the appraisal to the estate tax form, and pay tax on that value. I would have gotten the stepped up value as my base, so I really wouldn't have owed much capital gains on it since I was selling it right away. Once you get it outside of the estate, its like selling a normal house - you need to live in it for X years to get a break on capital gains. She passed in July, I put the house for sale in Feb, and settled in early April, about 2 weeks before the deadline. However, we had the appraisal, which was what I really needed.
- Car - estate tax on value on date of death. Her car wasn't in great shape since she smoked in it, and had some small accidents. I gave it to her housemate, who didn't have a car.
Expenses/random income: - Funeral/cremation expenses (deducted from estate value since I paid after she passed)
- house expenses - taxes, utilities, a couple of repairs. I probably could've charged some of the expenses for fixing it up to sell, but I didn't bother.
- possible credit card bills (fortunately I paid my mom's bill off just before she passed)
- a doctor bill from before she hit her deductible.
- refunds from health/car insurance/newspaper. I just notified the house insurance she passed and they put in the name of the estate. I got a refund when I sold the house.
- fee for the estate lawyer. Made it a lot easier for me, since he was in the same county as my mom and you need to file stuff and get forms from that recorder of will, as well as for walking me through all this.
- Various credit cards I called in to cancel. It was MUCH easier to do this from my mom's home phone, since the systems recognized it. I also got a form letter off the internet, and sent a letter to one of the credit agencies to let them know she was deceased and to get a copy of her credit report. I wanted to make sure I got all the cards, just in case I missed any.
My mom's estate lawyer was able to walk me through most it, but that may be because how how PA sets up its estate system. Other states would be different.
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shelby
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Post by shelby on Jan 26, 2018 9:01:42 GMT -5
I will talk to an account it is pretty complicated. Will I have to file his personal taxes and separate estate taxes? ETA I really dread this stuff. Did he die in 2017 or 2018? 12/17/2017
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resolution
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Post by resolution on Jan 26, 2018 9:11:39 GMT -5
I am really sorry for your loss.
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TheOtherMe
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Post by TheOtherMe on Jan 26, 2018 9:58:11 GMT -5
Did he die in 2017 or 2018? 12/17/2017 2017 will be your dad's final return. Income after December 17, 2017 on rentals, etc. until title is transferred will be reported on a fiduciary. Have seen both trusts and estates.
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Bonny
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Post by Bonny on Jan 26, 2018 11:14:05 GMT -5
2017 will be your dad's final return. Income after December 17, 2017 on rentals, etc. until title is transferred will be reported on a fiduciary. Have seen both trusts and estates. To further clarify in layman's speak, at this point there are technically three returns; 1. 1/1/17-1/17/17 Deceased taxpayer return 2. 12/18/17-12/31/17 Estate/Trust Return (not sure if your dad had a Trust). 3. 1/1/18- until distribution of assets is completed or 12/31/18 whichever comes first.
Not sure if you can opt out of #2 if the income is under a certain limit. TheOtherMe is a former IRS employee (Psst her real user name is Tax Pro )
I asked this in an earlier post but you may have missed it; did your dad have someone preparing his returns? If so, I would keep using that person for continuity purposes. The return isn't rocket science but it's helpful to keep using someone who has the depreciation schedule, etc in their data base. Otherwise you're paying someone to enter all that data fresh.
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shelby
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Post by shelby on Jan 26, 2018 11:21:44 GMT -5
I am not sure who he used before.
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TheOtherMe
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Post by TheOtherMe on Jan 26, 2018 12:00:55 GMT -5
While I have prepared trust returns in my life after the IRS, I have no formal training in Estate taxation at the federal level.
I have never prepared an estate tax return.
If you can find his prior year returns, they should be signed by a paid preparer. Tax returns on rentals will definitely be easier with the depreciation schedules.
Sorry I didn't use laymen's terms. When I prepared tax returns, they were divided by individual, business and fiduciary.
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Tiny
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Post by Tiny on Jan 26, 2018 14:25:16 GMT -5
I am not sure who he used before. Sorry for your loss
You may be able to find the previous years paper Tax forms - the name of the preparer will be on them - it's at the bottom of the first or second page. You may also be able to go thru his checking account statements (or his handwritten check register) for Jan/Feb/March/April and see if he wrote a check that looks like it might be for tax filing. You could also review his CC statements for the same thing. If he was old school he may have the paper statements in a folder at home somewhere. If he was using on-line banking - you might be able to access the account(s) on-line and review a couple years of statements (bank and CC) that way. If you go to the Bank someone may be able to help you with the statements (but it might be expensive) or maybe a CSR will find the 'page' and print it out for you for free.
It might be helpful to have the tax forms from previous years when you work with what legal type person (accountant/CPA/Lawyer). Just cause you'll have the quick answers to some of the questions.
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bookkeeper
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Post by bookkeeper on Jan 26, 2018 16:04:59 GMT -5
Given that Shelby's dad only recently passed away, is it possible that the tax the financial advisor was talking about is her father's 2017 tax obligation? Nothing to do with the inheritance yet needing to be paid out of the estate before distributions? This was my thinking as well. My Dad passed away toward the end of the year, and that is one of the first points that was brought up. We filed a trust federal tax return and my Mom's federal tax return before the following spring. We will continue to file both until Mom passes and the final estate is disbursed. My brother, the trustee, and I both read this book: The Trustee's Legal Companion by Liza Hanks, Attorney, Carol Elias Zolla, Attorney. It helped to have a reference close at hand. The book filled in a lot of blanks about how the process works. We paid for an Attorney (one time fee) and a CPA (annual tax prep fee) as we worked through the business of the trust. Get plenty of copies of your executor documents and the death certificate. We needed 8 copies of Dad's death certificate to consolidate accounts and close accounts that had patronage credits. My sympathies for your loss. You have an important job to do.
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TheOtherMe
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Post by TheOtherMe on Jan 26, 2018 18:05:51 GMT -5
This is when I'm glad my parents didn't have a lot of accounts and real estate. Everything is at one bank, except for dad's life insurance.
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skubikky
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Post by skubikky on Jan 29, 2018 13:47:52 GMT -5
I inherited part of my dad's IRA, and I have to take rmd' s out of it every year, since he was over 70.5 when he died. The first year's rmd was based on his age (probably because he hadn't taken that year's yet), and after it is based on mine. Actually, my DB and I split my dad's rmd requirement that year so my DS didn't need to until the following year based upon her age. Fidelity's website explained it all very well. Based on my 94 year old dad's current RMD, my sister and I will most likely inherit it. I know we will have income because of it. She even suggested having in take it all out at once. I asked her why should he pay taxes on a lump sum? That's the last time she has mentioned liquidating the IRA. And this is why I exhausted my Dad's IRA for his assisted living expenses before his taxable account, which was magnitudes larger anyway.
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skubikky
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Post by skubikky on Jan 29, 2018 13:52:07 GMT -5
Did he die in 2017 or 2018? 12/17/2017 sorry kiddo...my Dad passed this past August at 93 1/2.
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skubikky
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Post by skubikky on Jan 29, 2018 13:59:21 GMT -5
This is when I'm glad my parents didn't have a lot of accounts and real estate. Everything is at one bank, except for dad's life insurance. Absolutely. My Dad didn't own any real estate at the time he passed. - One checking account that I became joint on a few years ago. - One investment account titled to his trust. - REIT which is titled to the trust - Lastly, some stock that I managed to move over to Fidelity from the transfer house(epic effort that took months and a major pita) just a matter of weeks before he passed away. As POA I titled it to his trust and the transfer to us was simple. We didn't need to probate his will as everything was titled to his trust or held jointly. My sister and I had already taken possession of valuables well before he moved to assisted living. My step siblings emptied his apartment there and it all has gone pretty smoothly. And as straight forward as it has been, there's still a good deal of work to do which in the first few months. Will file a tax return for the estate for 2017 in the coming weeks. Dad's CPA will do all that for us and guide us. Pay what is owed and wrap up the balance of bequests.
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TheOtherMe
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Post by TheOtherMe on Jan 29, 2018 16:40:49 GMT -5
Sorry for your loss.
Dad's only taxable account is a savings account that is drawing less than 1%. His IRA makes more than that because of when it was opened and the investments.
Like I said, no stocks ever, car and house have been sold. His assets are his money in the bank, his money in his independent living apartment (a set % of that is returned 30 days after vacating) and what is in his apartment. No credit cards, etc. I will be making the phone calls. I have to make one tomorrow to his former employer dealing with his health care expense reimbursement that they denied. They are wrong. It's for his Part D for last year and it was done through them. I have no idea of the reason it was denied. I can't figure out their reason. It's one sentence and says less than IRS notices.
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countrygirl2
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Post by countrygirl2 on Jan 29, 2018 19:48:19 GMT -5
Our son will have fun with our estate unless a lot changes. He has our attorneys name will have our CPA's name. Good luck to him. We hope it is simplified by having an LLC and he as a silent partner at this time will cause what is in it to pass title to him.
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shelby
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Post by shelby on Feb 6, 2018 9:57:20 GMT -5
Thank you I still have my hands tied since it is taking forever to get the estate documents accepted in court. Still not appointed executor and I have no estate tax ID to pay bills and start taxes. I guess our court is very slow and an issue that caused it to be rejected...my lawyer believes was due to electronic signatures instead of original. We will see, it's just another thing to worry about
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nittanycheme
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Post by nittanycheme on Feb 22, 2018 21:59:09 GMT -5
How is your journey as executor progressing? It took about a week to get my mom's estate tax ID as well, although the executor appointment was fairly quick. We took the original will to the recorder of wills at the courthouse, they read it, asked for ID and a check for a certain amount of money (based on the estimate of the estate's worth), then swore me in. After that, it took a little bit as they printed out the "long form" executor paperwork, and sealed/notarized it. Then issued a bunch of the short forms - which also need the seal. I actually found it oddly easy. I hope that you are able to deal with your loss while you are going through this, and that it isn't too overwhelming.
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