Tax/Inheritance Question

Discussion in 'Budget Board' started by daughtersrus, Jan 22, 2008.

  1. daughtersrus

    daughtersrus DIS Veteran

    Feb 26, 2002
    Last year my dad added me to all of his bank accounts as a co-owner. He passed away last week. His will states that his assets are to be split equally between my sister and myself leaving my brother nothing (that's a long story).
    The question that I have is do I have to claim the money that is in the accounts with me as a co-owner as income for my 2007 tax return?
    Will my sister and I have to claim it as income/inheritance on our 2008 returns?
    My sister is listed as the beneficiary on the life insurance policy (I wasn't born when my parents took it out). Is all of that income or just the amount left over after funeral expenses?
    We're not talking about a huge amount of money. I think that the life insurance was about $16,000 with funeral expenses around $9,000. The bank accounts are about $44,000.
  2. Big Kahuna

    Big Kahuna Super Silent Lurker

    Feb 10, 2005
    Each state handles estates differently. You will probably have to probate his will. My best advice is to contact an attorney. Especially if your brother feeling left out, decides to contest the will.
  3. Avatar


    to hide this advert.
  4. Cheshire Figment

    Cheshire Figment <font color=red><marquee behavior=alternate>Friend

    Jan 12, 2001
    Technically he should have filed a Gift Tax return, but there would have been no tax due. Also, since you were co-owner, under most laws all the money is now yours and does not need to be shared with anyone.
    Any income received as an inheritance is not subject to Federal Income Taxes. If the Estate is very large (over $2 Million) the Estate will owe taxes.
    Life Insurance proceeds are never taxable income (unless the policy was owned by and paid for by the beneficiary).
    But it would not hurt to check with an attorney in your locality who specializes in Estates and Trusts.
  5. suevee

    suevee <font color=red>I am in a frenzy!<br><font color=r

    Mar 28, 2000
    My dear MIL just died a few months ago. This is our experience in MD. Yours may be different.

    All her expenses (taxes, bills, housing payments, etc) and funeral costs were taken from her checking and savings account in which my SIL is a co-owner. Since my SIL is the co-owner of the accounts and she is still alive, the accounts are not part of the estate. They belong to my SIL after Mom's bills are paid. If there is any money left over it is up to her to divide it or not.

    Mom's insurance and CD's were split between the children as they were in a trust and seperate from her main estate. All the children were listed as beneficiaries of both the insurance and the trust.

    If your sister is listed as sole beneficiary of the insurance policy she owns the proceeds. An insurance policy is not generally considered part of the estate to be divided but goes to the beneficiary.

    Please be careful with her accounts as you are supposed to reconcile all outstanding debts as well as funeral expenses through her estate, ie savings and checking accounts, before dividing up the remainder. It can take 6 months to a year to clear all accounts before the money is freed to be divided.
  6. Benducci

    Benducci <font color=peach>Disney Fiends!!<br><font color=b

    Oct 7, 1999
    I thinkyou need to check HOW that account is titled. If you are a co-owner, it might all belong to you and you pay the taxes & what not. I would check with an estate attorney on how to proceed. And check with your accountant. It really isn't something you want to screw up. I am sorry for your loss.
  7. nanadeb

    nanadeb Mouseketeer

    Sep 3, 2006
    Your sister owns the proceeds of the insurance policy. Funeral costs willnot come out of this unless she decides to pay for them out of the goodness of her heart. We found this out in 2000 when my FIL died. He left his wife as beneficiary, but she died 2 months before he did. The insurance company split the proceeds amonst all 7 of the children. The rest of them declined to help pay for the funeral.
    You will need to probate the will and pay for expenses out of the accounts. Are you the executor? If not, you will have to pay an attorney to be one. Regardless, you will want an attorney to file for probate and for settling and closing out probate and dispersement of funds.
    Although my husband was a cosigner on the checking account, the bank froze it and we could not pay the bills from it. You need the court to allow you to use the accounts to pay off bills, and you do need to keep a strict accounting of the money.
    Good luck. It takes a long time to clear an estate.
  8. Hedy

    Hedy <font color=blue>I'm <s>22</s> 27 and I still kind

    Mar 14, 2006
    Just wanted to say I'm sorry for your loss.
  9. pbharris4

    pbharris4 DIS Veteran

    Jan 14, 2005
    I'm sorry for your loss. The best recommendation I could give you is to seek legal advice from a lawyer who specializes in wills, estates, etc. (If you haven't already). There can be alot more to the estate than you know. Outstanding debts you may not know about, other life insurance policies you may not know (our parents don't always tell us everything), etc. Not knowing why your brother was cut out..that can be an issue as well.

    My dad had a will, but it wasn't signed/witnessed by a second person so it went to probate...thankfully. My dad had 3 girls. My oldest sister has always stolen from my parents. We found out during probate that she had taken out a student loan in my dad's name and forged it (we could tell..easily). It was for 2 loans each for about $2500-$3000 each). They were never paid and eventually ended up being a total of $11,000 which she had to pay out of HER portion or she'd go to jail. She also withdrew $$ out of his bank account 2 hrs after he died. Makes me sick. And SHE wanted to be the we know why. She's 46 and thought "The first born gets everything." That shows you what era SHE'S living in. Thankfully, my other sister did it and it all turned out fair. I was pregnant and didn't want to deal with it. The whole ordeal made DH and I re do our will and living trust, etc.

    But's best you see a lawyer to avoid complications. Best wishes to you. And again so sorry for your loss.
  10. daughtersrus

    daughtersrus DIS Veteran

    Feb 26, 2002
    Thank you all for the advice.

    I wanted to clarify a few things. I am listed on both of my dad's accounts (one CD and one Checking) as an owner, not just a signer. I have been paying all of his bills for the last few months out of his checking account.

    My brother was left out of the will because when my mom was still alive, he lived near them. He stole a lot of money from them as well as charging large amounts on their credit card. Together, my parents decided that he got more than his fair share while they were alive and didn't want to leave him anything. They also realized that with his lifestyle, it would most likely be spent on drugs. He lives in another state and we only have his phone #. My sister spoke to him while Dad was sick but he's not returning any calls since she told him about the death. She left one last message today letting him know when and where the service will be.

    Dad redid his will after Mom's death. It is witnessed and notarized.

    The only thing that is in his name only is his car.

    I guess that we'll have to call an attorney. I just know that Dad would hate us spending money on that. He was the kind of man that hated to pay for things that he didn't think were necessary.

    The stress is beginning to get to me. To make matters worse, my mother in law also died last week. My father in law is still alive so we don't have to deal with that side.

    Thanks again for all of you thoughts and well wishes!
  11. LuckyMamaInDE

    LuckyMamaInDE DIS Veteran

    Oct 3, 2004
    I'm sorry for your losses. I think the money you'd pay to an attorney will be well worth the reduction in stress you are feeling now. Best wishes.
  12. Benducci

    Benducci <font color=peach>Disney Fiends!!<br><font color=b

    Oct 7, 1999
    If you were listed as an owner on the accounts, then the money belongs to you. I don't think you are under any legal requirements to gie it to anyone else. But I really would check with a lawyer to be safe.
    I am so sorry for your losses.
  13. ChickieToo

    ChickieToo DIS Veteran

    Jul 8, 2004
    Based on experience, here's how it goes:

    All money and assets (house, car, other property) that were in his name alone will become part of the estate. The assests will be sold and the proceeds will be put into the estate account. This is the money you use for bills.

    His outstanding bills need to be paid out of his estate.

    Hire a lawyer--it won't be much, and that will be paid out of the estate too.

    His will needs to be submitted by the lawyer (don't know if you can do it yourself) to the probate court in the town where he lived. The probate court will make sure that the assets and any inheritence is divided in accordance with the will.

    Check the wording on the accounts. If the accounts are listed in a "survivorship" then they are yours. I don't believe his bills need to be paid out of that, but I'm not sure--check with your lawyer.

    No tax will be paid on the life insurance or an inheritance.

    Technically, if his bills exceed his assets, some people don't have to be paid. But morally, you know the money in the accounts is really his and you should pay off his bills. Your lawyer will advise you on this.

    I've been an executor a few times, and this is based on my experience.

Share This Page