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Christopher Phelps
Christopher Phelps, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 2710
Experience:  CPA, CFP, PFS, Tax Practitioner 21 Years, Member AICPA/CSCPA Tax/Financial Planning Committee Member
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Death and taxes

Customer Question

My father died 2 months ago without a will. There are 2 houses (no mortgage) and about a million dollars in the bank. My mother never heard of death taxes and is not worried about having to file a final return for my father. She says that everything is hers. I agree that everything transfers to my mother but am worried about taxes that may have to be paid. My mother is afraid to do a trust --mainly, she says that she does not know who to pick to be the executor and would just rather have the state figure it out with probate. We (8 adult children) keep telling her that this is not the thing to do. Her bank account has all of the kids name on the account. We think that she needs to list all the kids’ names on the titles to the houses as joint owners. We live in California, Please advice.
Submitted: 11 years ago.
Category: Tax
Expert:  Christopher Phelps replied 11 years ago.

Go see an estate/probate attorney immediately.  When an individual dies without a will, he is considered to have died "intestate".  This means that California's statutary laws of succession control to whom your Father's assets will go.  The children can obviously decline to accept assets under the statutory scheme in favor of the Mother so that she receives the assets.


Current law only requires an estate tax return (Form 706) to be filed only if the value of your Father's portion of the assets exceeds $1,500,000 (before considering any debt).  She will also be able to file her 2005 income tax return using married filing jointly filing status.  Starting in 2006 she will file as a single (unless she remarries). 


She should really get a living trust in place so she can appropriately direct her assets disposition upon her death and avoid probate.  I would not recommend placing the children's names on her assets while she is alive.  That just creates a lot of gift tax issues and you will not receive a step-up in cost basis (i.e. to her date of death fair market value) when she passes away.  The better approach is to have a trust.  If she is having an issue naming a successor trustee and executor, she can always have the attorney do it.  That way she shows no favoritism to any one child and she can have an independent, disinterested person handling her estate in the way she desires.

       

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