Author Topic: Inheritance Drama: You Got Any? Stories Wanted.  (Read 264956 times)

secondcor521

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Re: Inheritance Drama: You Got Any? Stories Wanted.
« Reply #1100 on: March 17, 2017, 07:08:27 AM »
My state levies an inheritance tax on some distant relatives as well as all non-relatives who inherit as a result of a will, joint account, or transfer-on-death designation, but doesn't levy that tax on funds those same people receive as a result of being a beneficiary on a life insurance policy. I have no human dependents, but I still have life insurance to make things more flexible in terms of avoiding the state inheritance tax, both now and in the future. Life insurance is inexpensive at my age, but I will definitely reevaluate that decision when I am older and it becomes more expensive.
I'm confused with how this is carried out on a joint account. How does anyone know what is inherited in a joint account vs what's already yours?

I don't know about notquitefrugal's state.  But I do know that it varies by whether or not your state is a community property state.  In my state, which is a community property state, 50% of the value of the joint account as of the date of death (including accrued but not paid interest; not like that is any real world factor, but I'm dealing with an attorney) is included for purposes of the estate valuation for estate tax purposes.

What happens in actual fact is the attorney asks the executor to calculate the number and provide it to them, then the attorney puts that number into a big long legal document, then the executor signs that document and then the attorney submits that document to the probate court as part of the estate settlement process.  One could guess or take shortcuts or lie, but I'm sure there is some sort of statement or oath the executor must make about accuracy and completeness.  So in our case we figured it properly to the penny; fortunately it was an account with little activity and no interest, so easy to calculate.

For Vanguard accounts, you can call up a special department there and they'll run a report for you that does essentially the same thing.  Weirdly, in my state one gets a step-up in the entire basis (not just half of the account's basis) to value as of date of death.  I don't know why, but that's what I was told to do when I looked into it.

Again, this all varies state to state, so even though people say a lot of stuff about how estates work, the answer in almost every case is to consult an estate attorney in the applicable state who comes with good recommendations.
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radram

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Re: Inheritance Drama: You Got Any? Stories Wanted.
« Reply #1101 on: March 17, 2017, 07:14:23 AM »

For Vanguard accounts, you can call up a special department there and they'll run a report for you that does essentially the same thing.  Weirdly, in my state one gets a step-up in the entire basis (not just half of the account's basis) to value as of date of death.  I don't know why, but that's what I was told to do when I looked into it.


So are you saying if I create a joint account that is a ratio of a million to 1, and then the $1 dies, the million gets stepped up in cost basis? I smell loophole :)

What is your state?

 

secondcor521

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Re: Inheritance Drama: You Got Any? Stories Wanted.
« Reply #1102 on: March 17, 2017, 08:02:11 AM »

For Vanguard accounts, you can call up a special department there and they'll run a report for you that does essentially the same thing.  Weirdly, in my state one gets a step-up in the entire basis (not just half of the account's basis) to value as of date of death.  I don't know why, but that's what I was told to do when I looked into it.


So are you saying if I create a joint account that is a ratio of a million to 1, and then the $1 dies, the million gets stepped up in cost basis? I smell loophole :)

What is your state?

Idaho.

I think your "loophole" would work, but understand that the $1 person, while alive and a joint owner, has every right to sell "your" million and give it away or blow it on whatever.  It's also fairly easy to get a divorce in Idaho, and financials are usually split close to 50/50 regardless of who brings or earns the money, who does what with whom, and who decides to leave.
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