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Merlo
Merlo, Accountant
Category: Tax
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Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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Suppose I make a specific bequest of a house to someone, does

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Suppose I make a specific bequest of a house to someone, does the value of the house count towards my unfied credit when I die? Would the person receiving the gift of this house have to pay any taxes. I thought you could only "give" someone $12,000 tax free a year.
thank you,
cbh
Submitted: 8 years ago.
Category: Tax
Expert:  Merlo replied 8 years ago.
Hello jake,

Under current IRS regulations, each taxpayer may give gifts of up to $1 million in their lifetime before any gift tax becomes due.

The annual exclusion which you refer to is currently $13,000 for the year 2009. For gifts you give to any one individual that are less than $13,000, they do not count towards your $1 million lifetime exclusion, and they also do not need to be reported. Gifts which exceed the annual exclusion amount of $13,000 must be reported on Form 709, and those gifts then reduce your $1 million limit. But no tax is actually due until the lifetime limit has been reached.

If you leave your house to someone in your will, then the house becomes part of your estate assets. If your total estate assets exceed a certain limit, then your estate assets become subject to estate taxes. The current limit on estate taxes is $3.5 million. Estates under that value are not subject to estate tax.

If this was helpful please press the Accept button. Positive feedback is also appreciated.

Thank you jake.

Customer: replied 8 years ago.

I am grateful for your answer Merlo, I was not totally honest, because I did not want anyone reading this answer. I have been handling my Dad's estate and it has been a total cluster.

Can you keep this off the web? I have been through several attys, whew, get different advice each time.

My dad died in a year that had 1.5 mil in unified credit, his estate was worth appx 3.5 mil. He left everything in a trust except for making specfic bequest of a house to his girlfriend. The estate paid approx $353k to the dime in estate tax. The house was sold and I held half the proceeds until I got the 706 finalilized. Does the girlfriend have to pay any tax on the proceeds of the sale of this house? Why can't we pick which assets pour over the unified credit? jake

Expert:  Merlo replied 8 years ago.
Hello again jake,

It really depends on just how your father's will or trust was worded.

If you have an estate plan, then your Last Will and Testament or Revocable Living Trust will contain specific instructions about which assets should be used for paying the estate tax bill. The typical instructions will state the following:

Beneficiaries receiving a specific bequest or tangible personal property won't be charged with paying the tax unless all other assets have been used first.



If you only have a Last Will and Testament, then the recipients of any non probate property that's included in the value of your estate for estate tax purposes will pay their proportionate share of your estate tax bill.


If you have a Revocable Living Trust, then the recipients of any property passing outside of your trust that's included in the value of your estate for estate tax purposes will pay their proportionate share of your estate tax bill.


If you only have a Last Will and Testament, then the recipients of the "residue" of your estate (meaning your property other than specific bequests and personal effects) will bear the estate tax burden.


If you have a Revocable Living Trust, then your Pour Over Will will provide that your estate tax bill will be paid out of your trust assets and your trust will provide that the recipients of the "residue" of your trust will bear the estate tax burden.


Property passing outright to a surviving spouse or through a Marital Trust and qualified retirement plans won't be used to pay the tax unless all other assets have been used first.

An estate attorney should be able to look at the trust and will documents to determine if the language dictates how the estate tax should be proportioned, but this is basically how it works.

If this was helpful please press the Accept button. Positive feedback is also appreciated.

Thank you jake.


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