Let me preface this with the following:
* an estate lawyer HAS been asked. I just find the answer strange.
* I am NOT the responsible party here. This falls on an executor and that is not me. I am just an interested bystander.
Just the facts:
* My Dad died in 2016. His will passed the estate to his 3 children and 2 grandchildren in various amounts.
* Most of the estate has been distributed but a portion has not. It is a significant amount of money but not the majority of the estate
* Prior to the last checks being written to close out the estate (plus a handful of valuables)... one of the surviving kids died in 2017. There is nothing in the will that says "must outlive me by X months".
* Surviving kid is believed to have died intestate. We're working on confirmation of this.
* As applied to the sibling that passed, Texas law says that separate property (like inheritance) would be divided 1/3 to her spouse and 2/3 to her kids (assuming no will).
What I think, having absolutely no training in legal matters whatsoever
* The remaining distribution should be paid to her estate, then distributed accordingly
What the estate lawyer is saying
* the remaining distribution should be paid 1/3 to her spouse and 2/3 to her kids (and make spouse sign a waiver saying he understands what is going on).
To me this creates a tax and accounting nightmare. And yes, a large portion of this distribution is taxable money.
* From an accounting perspective, someone in sisters estate will have to examine every "dollar" and say "was this dollar inherited? If so, was the 1/3-2/3 split applied to it already?"
* From a tax perspective, this just seems WRONG WRONG WRONG. I would think taxes on the taxable portion should be paid for the full amount by sister's estate... then distributed to her kids (tax free). But if distributed the way the lawyer says, this means that the kids will pay the taxes on the portion that would have gone to their mom.
I've tried googling for the exact estate portion of the Texas law... and haven't quite found it... and I'm not sure I'd comprehend it fully if I did.
Does the estate attorney's advice seem right? It seems totally wrong to me from a common sense perspective, but it may still be correct legally.
