Taxpayer asks:
I’ve been trying to get my parents to make a Will. I’m now there only living child. My parents have told me everything goes to me. They have been told by a friend that if they make a Will & leave me everything including there house that when they die I will have to pay taxes from the date they signed there Will. Is that correct?
Taxgirl says:
Nope, not even close.
An estate is taxed as of the date of death, not as of the date of signing a Will.
The lack of a Will does not result in a lesser tax burden. Similarly, any scheme to avoid probate (such as simply funding a revocable trust) does not relieve the estate of a tax burden. In fact, without any planning, your parents’ estate will likely be subject to estate and/or inheritance taxes depending on your state of residence and the size of their assets. A good estate planning attorney will be able to create a strategy to help save on taxes and not the other way around.
And last word? Irrespective of taxes, absolutely everyone should have a Will. It doesn’t matter how much or how little you own. Really.
Like any good lawyer, I need to add a disclaimer: Unfortunately, it is impossible to give comprehensive tax advice over the internet, no matter how well researched or written. Before relying on any information given on this site, contact a tax professional to discuss your particular situation.
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{ 2 comments… read them below or add one }
Kelly’s advice is absolutely correct. I practice in this area and all too often encounter people with huge misconceptions about estate taxes and probate.
One huge caveat, if a combined estate (husband and wife) is in excess of $3.5 million (including life insurance, house, and retirement plans, etc.) it is critical that you speak with an attorney that has estate tax expertise, not just someone who can draft a will.
I second Kelly’s post and Brad’s comment – in my experience – it’s (almost) always the clients who think their estate plans are “simple” that end up being the most complicated.
Find an estates attorney that you feel comfortable with – and don’t rely on what the “friends” “neighbors” or “radio announcers” have to say.