You would get a step-up in basis, so you would not be responsible for gains that took place during the life of the decedent. … [Read more...] about Do you pay capital gains tax if you inherit appreciated assets?
There is rarely any good news to share about taxation, because the tax man is pretty active, but this is an exception. You do not have to claim an inheritance on your state and local income tax returns, and this applies to insurance policy proceeds and direct inheritances. When it comes to individual retirement accounts, it depends on the type of account. A traditional account beneficiary would have to report the income, but distributions from a Roth IRA are tax-free. … [Read more...] about What about income taxes?
There are a number of states in the union that have state-level estate taxes. Fortunately, we do not have an estate tax here in the Golden State. However, if you own property in a state with an estate tax, their tax could be a factor if the value of the property exceeds the exclusion in that state. The state-level exclusions are typically much lower than the federal exclusion. For example, there is an estate tax in Hawaii, and the exclusion is about half of the federal … [Read more...] about Is there a California state estate tax?
The estate tax was originally implemented in 1916, and there was no gift tax then. People took advantage of the loophole, but it was closed when the gift tax was enacted in 1924. It was repealed two years later, but it was reenacted in 1932. We have had a gift tax since then, and it is unified with the estate tax. The lifetime exclusion is a unified exclusion that encompasses lifetime gifts along with an estate. However, there is an additional annual gift tax exclusion that sits apart from … [Read more...] about Can you give gifts to get around the estate tax?
There is a marital deduction that gives you the ability to transfer unlimited assets to your spouse tax-free, but there is one stipulation. In order to use this marital deduction, your spouse must be a citizen of the United States. … [Read more...] about Do you have to pay this tax on transfers to your spouse?
No, in fact, very few families have to pay the estate tax. There is an estate tax exclusion that can be used to transfer a certain amount tax-free. The portion of an estate that exceeds this amount would potentially be subject to the estate tax and its 40 percent maximum rate. At the time of this writing, the exclusion is over $11.5 million, but it can be changed via legislative mandate. … [Read more...] about Is every estate subject to the federal estate tax?
Under Medicaid/Medi-Cal regulations, the program is required to seek reimbursement from the estates of people who used their services. Since you cannot qualify for Medicaid/Medi-Cal if you have significant assets in your name, the cupboard is usually bare so to speak. The situation is different with a Supplemental/Special Needs Trust. If you fund this type of trust for the benefit of someone else, it would be a Third-Party Supplemental/Special Needs Trust. When you establish a Third-Party … [Read more...] about Who gets the remainder that is left in a supplemental needs trust after the death of the beneficiary?
As a response to the eligibility situation, you could establish a Third-Party Supplemental/Special Needs Trust for the benefit of a loved one with a disability or who is eligible for needs-based government benefits. You would name a Trustee to act as the administrator or manager of the Trust. This can be someone that you know personally, or you may use a professional trustee such as a private fiduciary or the trust department at a financial institution. The beneficiary would never be able … [Read more...] about What’s the solution?
There nothing stopping you from doing this, but in many cases, it could cause more problems than it solves. Obviously, health care insurance is very important for people with special needs. Most Americans get their coverage through their employers, and a high percentage of people with disabilities cannot work. The solution for many is Medicaid, which is a need-based government health insurance program which has been implemented in California as Medi-Cal. Supplemental Security Income is … [Read more...] about Why can’t I just name someone with a disability in my will or Trust?
With a traditional individual retirement account, the distributions would be subject to taxation, and the distributions would be mandatory. The beneficiary of a Roth IRA (if it is someone other than your spouse) would also be required to take distributions, but they would not be taxed. … [Read more...] about Are IRA distributions to the beneficiary taxable?