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Financial Advice Needed: Executor of Parent's Estate

Old 03-30-2009, 02:29 PM
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Default Financial Advice Needed: Executor of Parent's Estate

As the executor with several siblings, I am trying to determine the best way to setup everything before my mother passes. One of my sisters said I should put my name on the title of my mom's house, so that we won't have to pay a lawyer to put everything through probate. But, I don't think she was thinking about the fact that I would have to pay taxes on earned income, and I wouldn't really know how much this would be until filing after the year. She also mentioned doing this with her car as well, but the value of the car wouldn't really be as big of an issue. Anyone go through this recently? In today's market the house might be worth $100K max, so we aren't talking a lot of money here. Wouldn't we end up paying a lawyer to put something through probate anyhow, or can this be done without a lawyer. I guess my main objective is to keep it as simple as possible, and at the same time, keep costs as low as possible.
Old 03-30-2009, 02:37 PM
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look at a Reversible Living Trust if your Mom is still able to sign her name.
http://ezinearticles.com/?Six-Tips-O...ning&id=600400

Our objective in doing it was to eliminate or minimize the Probate process and, of course, to reduce the tax bite.

My bride and I had one drawn up for about $2200 and the attorney is available for estate consultation and changes with no additional fee. Lots of pass-through tax breaks from what he said. PM me for the guy that I used; he's in Pensacola and could probably suggest an attorney in your area.
Old 03-30-2009, 02:58 PM
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I just completed a will and trust for my children and highly suggest that you consult an attorney before doing anything. Things like quick deeding the house to you or your siblings does have tax implications. I am not in Florida so doubt that what I have learned would help you other than to recommend an estate planner.

Will, Trust, Living Will, Power of Attoney, etc.
Old 03-30-2009, 03:08 PM
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I don't know if Fla still has inheritance taxes, if that's where your mother resides. Here in La. we don't have any unless the estate is rediculously large. One thing I can recommend is that if there is none, or the percentage is low, value all the assets as high as you can without having to pay too much tax now. The reason is that say that 100k house becomes yours. You rent it out for 10 yrs., and then decide to sell it. Ignoring depreciation, the market has gone up to 200k. Now you have a long term capital gain of 100k to pay taxes on. If you can get away with giving it a value or 200k-250k now, and sell it for 150k later, you can get a long term capital loss, and a huge tax break. Naturally, you can't do that with cash accounts, but do it with everything you can and you'll come out much better in the long run. You do have to keep real values for yourself so that all the sibs get a fair deal. But ask your attorney about it. And push it if he doesn't know. It can save or cost your family big bucks. It's hard enough losing a mother.
Mike
Old 03-30-2009, 03:13 PM
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If there's cash in any accounts and if it's ultimate destiny will be to those that you're aware of, then doesn't she have the opportunity to Gift a certain amount of cash (it used to be $10K) to as many people as she wants without anybody paying tax on it?

I'm no tax man, just thinking out loud. I don't care to worry about or think about it, so when I pass, my boys will call the estate attorney or he'll call them. This is going to be as painless and as inexpensive as I can make it for the kids.
Old 03-30-2009, 03:18 PM
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Originally Posted by beenie View Post
I don't know if Fla still has inheritance taxes, if that's where your mother resides. Here in La. we don't have any unless the estate is rediculously large. One thing I can recommend is that if there is none, or the percentage is low, value all the assets as high as you can without having to pay too much tax now. The reason is that say that 100k house becomes yours. You rent it out for 10 yrs., and then decide to sell it. Ignoring depreciation, the market has gone up to 200k. Now you have a long term capital gain of 100k to pay taxes on. If you can get away with giving it a value or 200k-250k now, and sell it for 150k later, you can get a long term capital loss, and a huge tax break. Naturally, you can't do that with cash accounts, but do it with everything you can and you'll come out much better in the long run. You do have to keep real values for yourself so that all the sibs get a fair deal. But ask your attorney about it. And push it if he doesn't know. It can save or cost your family big bucks. It's hard enough losing a mother.
Mike
Please check on this. If she wills it to you then you only pay capital gains on the value that it appreciates from when she dies to when you sell it but if it is quit claimed then you pay capital gains on the amount it appreciates from when she bought it to when you sell it.
Old 03-30-2009, 04:08 PM
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Would it not be considered a gift if your mother put your name on the deed? She would then have to pay gift tax on the house. Then you would have to pay capital gains on it when it is sold. Cover your ass!!!. Hate to say it but you need a lawyer.
Old 03-30-2009, 04:49 PM
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To save money you'll want to avoid probate if possible, but need to be mindful of unintended consequences, like taxes, lost exemptions, medicaid recapture, etc. Best thing to do is to make a list of all her assets and HOW THEY ARE TITLED, and take this list to an attorney who does wills, trusts and probate and he or she will be able to go through the best way to handle each asset. Don't rely on free advice and try to do it yourself. It will cost a few bucks, but it'll be worth every penny in the time you save not having to deal with all the hassles later.

Last edited by agkpa95; 03-30-2009 at 05:04 PM. Reason: typos
Old 03-30-2009, 04:59 PM
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Get a lawyer of FL will find a way to seize all assests...


John
Old 03-30-2009, 06:36 PM
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Here in La. we don't have any unless the estate is rediculously large.
That statement really hit me wrong. Who is to say what is large or small? Someone worked hard to save for that estate, it didn't get there by anything other than planning. I'm not putting you down at all (I SWEAR!!), but I just found it odd how there's Libs (and some other Americans out there) that find it completely ethical to take from those with much at the end of their lives... and with no justification, to boot!

Not to harp at Mike, but ANYTHING we as citizens leave to future generations of our family has already been taxed to death (literally!). With the current system in place, Estate Taxes/Inheritance Taxes are a slap in the face to hardworking middle America, and a further example of redistribution of wealth.

((Nothing will ever change, because just like in every other issue in America, the Lawyers win everytime.... it's in their best interest to keep this crap going.))

To the OP, I wish you the best and I also wish you didnt' have to go through all this. It's hard enough just losing people close to you to then have to deal with all this other stuff. There's alot of good advice above and I hope you find exactly what you're looking for!

To Everyone, make sure you have these issues taken care of so that your kids and spouse aren't bombarded by not only losing you, but then also having the stress of paying the Gubment and all creditors. Take the time now (and money) to put at least a few of the cards in the right place.
Old 03-30-2009, 07:27 PM
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I have been through this. There is no need (and many possible reasons not) to put your name on the house.

Some kind of trust (Im no expert on the specifics) is the way to go I hear, but my folks house was part of the will and it all went smoothly with no major expense

A good will is most important.

Consult an expert on estate law in your state, its $$ well spent.
Old 03-30-2009, 08:35 PM
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I know two families that tried to do 100% of the legal work them self (well the executors did).....both cases it put a rip in the family that still stands today. After the dust settled in both cases the families aside from the executor felt the ordeal cost more then if they had paid a lawyer and it took three to four times longer.

If one goes down one road, where or when is it a mistake that can not be corrected? Being an executor means everyone is jumping on you for their money (if they are hungry).
Old 03-31-2009, 03:30 AM
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By no means am I an expert n estate taxes since I pass them off to a CPA friend of mine but as for the house if you transfer it to your and siblings name when you decide to sell it after she passes you will have to use the amount your mother paid for it as basis(plus any improvements). This is normally not good since most older people have lived in their homes for quite some time and they actually have little basis in the home compared to todays prices.

If you wait until she passes and ya'll inherit it then you have a new costs basis which is the value at her time of death, this normally means you can turn around and sell it with little or none profit and dodge the capital gains taxes, which by the way are the cheapest tax if it is long term.

I am not sure how the state you live in treats these things so that could be a problem
Old 03-31-2009, 05:03 AM
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Consult a qualified attorney. Preferably one board certifed in Estates and Trusts. I am a CPA/Registered Investment Advisor in the Orlando area. Don't be afraid to ask how they charge for their services.

The advice above regarding putting your name on the deed is correct. This will be treated as a gift, and when it is sold, the cost basis for tax purposes is what your mother paid. If the house "flows" into her Estate and is sold, the cost for tax purposes is the value on the date she passes, or you can elect to use a date 6 months later. In most cases, assuming the house sells within a few months, the selling price is the value at date of passing, and you actually have a small loss due to the closing costs/commission. The other downside to putting your name on the deed is potential liability to you as an owner.

If her assets are not significant in addition to the house and you are organized, you could do it yourself. If you take this route, it will take some of your time, and don't be afraid to take a fee from the Estate. Your siblings should understand you are doing all the legwork. Most of my clients come up with an hourly rate for you to be paid whether an attorney is involved or not. The staff in the County Probate divisions are fairly helpful. Feel free to PM me if you need more advice. I don't know any attorneys in your area, but I work closely with several here.
Old 03-31-2009, 09:17 AM
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I believe that most states have a "small probate" process in place for smaller estates. In our state, Wyoming, the amount that can pass under these provisions is $150,000. Basically the heirs do the "small probate" work, rather than hiring an attorney. If the estate is fairly simple, this might be a way to go. You might check with your state to see if it has these same provisions. As far as transferring the house to you, the above advice is right on, you may be setting yourself and siblings up for an unexpected tax bite. If the estate is pretty small, no reason to do this. Remember, for people dying in 2009, the amount of estate they can pass tax-free, for federal purposes, is $3,500,000. That's still quite a bit, even in today's world.
Old 03-31-2009, 09:32 AM
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Going to be some interesting cases in 2010 for large estates with the repealed inheritance tax. If wealthy granpa is on life support in late December 2009, keep him alive at any cost.

But look out if Grandpa gets sick in December 2010 before the limit reverts back to 1M in January 2011. I think many relatives are not going to want Grandpa to "suffer" into the new year.
Old 03-31-2009, 03:33 PM
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GW, I think I saw somewhere in Obama's budget that the repeal is a thing of the past and that they will freeze the exemption equivalent at 2009's level with adjustments for inflation. I would expect that to happen, since the repeal is really unwise. A $3,500,000 estate is still pretty big and, if I remember correctly, the un-used portion of the first person to die can go to the second person, so we are really talking about $7,000,000 being able to pass free of estate tax. When I started working in the tax business, 1973, the amount able to be passed estate tax-free was $60,000, I think.
Old 03-31-2009, 03:45 PM
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JAL, yes, I believe you are correct. I always thought it was funny to think about the scenarios that could happen if it was left with the full sunset. Made tax planning pretty tough, other than "die in 2010."
Old 03-31-2009, 04:05 PM
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And be careful if you have the attorney do the estate taxes. A friend's wealthy father died and left a fairly simple estate, and the estate attorney prepared the taxes. When the friend did his own income taxes his (our) tax guy (a retired partner / CPA from one of the big firms) discovered that the lawyer made a substantial (5-figure) error in the estate taxes, and they had to refile the estate (and got their money back). The lawyer's response? "Oh."

Let an attorney be a lawyer and let a CPA do your taxes, all the while remembering that there are lousy lawyers and lousy accountants.
Old 03-31-2009, 04:34 PM
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Originally Posted by JALICHTY View Post
if I remember correctly, the un-used portion of the first person to die can go to the second person, so we are really talking about $7,000,000 being able to pass free of estate tax.
I had heard rumors about portability but I don't think it's in effect now. Is it supposed to go along with the repeal?

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