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Thomas McJD
Thomas McJD, Attorney
Category: Estate Law
Satisfied Customers: 6516
Experience:  Wills, Trusts, Probate & other Estate Matters
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I worked for a gentleman who recently died and has a large

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I worked for a gentleman who recently died and has a large estate. About 6 months ago he lent me money to buy a house and held the first deed of trust. 3 weeks BEFORE he died in front of a lawyer and a notary he forgave the loan and then proceeded to grant me 5% of his trust. He made an instruction to offset the amount of the loan he forgave against the trust disbursement I will get. I am concerned about the tax treatment of the initial forgiveness being tied up in estate taxes. Can you clarify?

TMcJD :

Hi, I will be happy to assist you, and it is my goal to make you a very satisfied customer! This may take a few minutes, so thanks for your patience.

TMcJD :

There are no US estate or other tax consequences to you. He made a gift to you and that is a taxable gift under US gift tax rules. His estate would owe those gift taxes unless it uses part of his estates $5.25 million estate and gift tax exemption amount. US estate and gift taxes won't affect anything unless the estate size (plus the amount of the gift) are worth more than $5.25 million.

Customer:

Thank you! I understand.

Customer:

Two issues.

Customer:

1. His estate is probably $20 million USD

Customer:

2. The initial loan did come from his trust because all his funds are in this trust, but he forgave it while he was still living. Isn

Customer:

Isn't the tax burden on his trust fro the gift, not against me?

TMcJD :

Yes, the tax burden is on the trust, not you. You have no tax issues. His estate has those issues. As long as the gift was properly recorded and any changes were properly made to his trust (leaving you a devise/bequest) prior to his death, then the only thing you'll have to to is wait for his estate to resolve the US estate and gift tax (and other tax) matters prior to receiving any portion of his trust that he left for you.

Customer:

Thank you very much!

TMcJD :

You're very welcome. I would be grateful if you could leave me a positive rating for my assistance. Thanks so much and have a great day!

Customer:

I will definitely. BTW, the rest of the bequest that comes to me after the gift is taxable to me and at what rate?

TMcJD :

No, inheritance is not taxable as income under US laws.

TMcJD :

Just let me know if you need anything else. You can leave that positive rating by clicking one of the happy faces (the 3d, 4th, or 5th one). Thanks again!

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