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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 4014
Experience:  Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
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i live in california, bought a house with my boy friend in

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i live in california, bought a house with my boy friend in Texas. a year later we were married but never change the title. he passed away so now i have to pay federal tax on his estate of half the house. i am saling it.his daughter is going to get 50%of his half per the law in Texas. how do i figure what i have to pay. i read i subract his debts, funeral cost and all. not sure need help.
Submitted: 1 year ago.
Category: Tax
Expert:  Lane replied 1 year ago.

NPVAdvisor :

Hi, are you asking about inheritance taxes in TX?

NPVAdvisor :

Texas's estate tax system is commonly referred to as a "pick up" tax. This is because Texas picks up all or a portion of the credit for state death taxes allowed on the federal estate tax return (federal form 706 or 706NA). Since there is no longer a federal credit for state estate taxes on the federal estate tax return, ... there is no longer basis for the Texas estate tax. Texas has neither an estate tax – a tax paid by the estate, nor an inheritance tax – a tax paid by a recipient of a gift from an estate.


NPVAdvisor :

And if you're asking about the capital gains tax to those that inherit and then sell the house

NPVAdvisor :

Thre will be a step up in basis to the Fair Market Value f the home as of the date of the death... so that means that all interests that are inherited (if the home is sold right away) will have NO gain, hence no capital gains tax

NPVAdvisor :

Here's an excellent article about estate taxes in texax

NPVAdvisor :

Here's the law that is in play regarding the daughter

NPVAdvisor :

(557.213 Community property; disposition upon death of either husband or wife; administration of estate; procedure.


 


Sec. 13.


a) Upon the death of the husband or the wife, 1/2 of the community property shall continue to belong to the surviving spouse and the other 1/2 shall pass in accordance with testamentary disposition by the deceased spouse, or, in the absence of testamentary disposition, then to the heirs at law and distributees of the deceased spouse in the manner provided by law, subject to the following provisions of this section.


 

NPVAdvisor :

THE FEDERAL estate tax in only payable once the estate is above % million plus dollars (%5,250,000 in 2013)

NPVAdvisor :

sorry for the typo that was 5 Plus million

NPVAdvisor :

Will the value of his estate be over $5,250,000 ?

Customer:

no not over 5 million, what do you mean about what the portion his daughter should get. he had no will

NPVAdvisor :

That's right, if there's no will then it goes to the state intestacy laws, which, in TX, at the death of the husband or the wife, 1/2 of the community property shall continue to belong to the surviving spouse and the other 1/2 shall pass in accordance with testamentary disposition by the deceased spouse

NPVAdvisor :

Further, in the absence of testamentary disposition, then to the heirs at law and distributees of the deceased spouse in the manner provided by law

NPVAdvisor :

testamentary position means the will or a trust directing the assets

Customer:

so what does the law state that she is intitled to? all of his half

NPVAdvisor :

Let me look up the intestacy rules (rules for what happen when there is no will) in TX .... But I WILL tell you that it will be no worse than 12 to you... this is actually done (as a part of community property laws, not the intestacy laws) as a protection against the spouse being cut out of the estate completely...

NPVAdvisor :

Here we go:

NPVAdvisor :

Intestate Distribution for Those Who Die While Married


Many people may assume that if they are married and die without a will in Texas, their surviving spouse will inherit their entire estate. This is not always the case. How their property is divided depends on whether it is characterized as community property or separate property.


Community Property


All property acquired during a marriage is presumed to be community property. Under Texas laws, if you are married and are survived by a spouse and children, then:



  1. Your surviving spouse will inherit all your community property if all your children are also the children of your surviving spouse;

  2. Otherwise, all your one-half interest in the community estate will pass to your children, with your spouse keeping only his or her one-half interest.


If you do not have any children, then your surviving spouse will inherit all of your community property.


 

NPVAdvisor :

Sorry to throw so much at you but there is still anther issue (you really need to sit down with a TX estate attorney) but I'll walk you through it

NPVAdvisor :

You said that the house was in your husband's name?

Customer:

but as sterve harju and tracie russell

NPVAdvisor :

oh that's tight

NPVAdvisor :

Was just looking at the IRS guidance on this and it DOES look like it became community property when you became married.... Here's how they put it

NPVAdvisor :

When do spouses become subject to state community property laws? ... for Texas: When the spouses are married and domicile in the state.

NPVAdvisor :

I really think you should see an attorney on the inheritance issues ...... On the tax questions? We've answered that no federal estate tax, no state inheritance tax, and no, to minimal capital gains taxes

NPVAdvisor :

but the way the law is written, re: WHO inherits there's a lot of gray area (what is separate and what is community ALSO does her not being YOUR child decrease the percentage)?

NPVAdvisor :

the intestacy rules for separate property are as follows:

NPVAdvisor :

If your property is characterized as separate property, the distribution scheme is different:



  1. If you are survived a spouse and children, your surviving spouse is entitled to one third of your separate personal property and only a life estate (the right to use the property until his or her death) in one-third of your separate real property. The rest would be inherited outright by the children of the deceased spouse

NPVAdvisor :

Hoe this has helped ... looks like, from your original questions you've already gotten guidance on the estate ownership issues.

NPVAdvisor :

And, again, on the tax issues you really don't have any issues, given that there is no inheritance tax in TX, and you are below the exclusion for federal estate tax purposes and for the capital gains taxes on the sale of the home, you'll get an exclusion of capital gains taxes because this was your primary residence

NPVAdvisor :

If you file that last tax return as a join filer then the $500,000 of the capital gains is excluded

NPVAdvisor :

I still don't see you coming into the chat .... I'll move us to the "Q&A format, so you can ask additional questions if you need ... maybe that will help

NPVAdvisor :

We can still continue the dialogue there, just no in real-time chat as we can here

NPVAdvisor :

OH, I see you typing ... I'll wait

Customer:

sorry , it always showed you typing. so i was waiting for your response...lol

NPVAdvisor :

Yeah I hate that

Customer:

you have been very helpfull, i am a little relieved and upset that she gets part of my house. what can you do. thank you and have a great rest of the day.

NPVAdvisor :

So sorrry to be the bearer of bad news, You too. Let me know if I can help further

Customer:

i will

NPVAdvisor :


If this HAS helped, I would appreciate a feedback rating of 3 (OK) or better … That's the only way they will pay us here.



HOWEVER, if you need more on this, PLEASE COME BACK here, so you won't be charged for another question.


Customer:

do i just save and exit

NPVAdvisor :

I think that's it then you should be able to rate

NPVAdvisor :

Let me switch to Q&A, that sometimes helps

Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 4014
Experience: Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
Lane and 5 other Tax Specialists are ready to help you
Expert:  Lane replied 1 year ago.
Our chat has ended, but you can still continue to ask me questions here until you are satisfied with your answer. Come back to this page to view our conversation and any other new information.

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If you haven’t already done so, please rate your answer above. Or, you can reply to me using the box below.
Expert:  Lane replied 1 year ago.

Hi Tracie,

This will let you see everything we said better,

Feel free to come back and reference this and any of the links

I'm sorry for your loss

If you'd like to ask for me again just say "For Lane only," at the beginning of any other questions

Lane
Expert:  Lane replied 1 year ago.

Thanks for using us, Tracie.



If you'd like to work with ME again just say "For Lane only," at the beginning of your next question.


Thanks again,

Lane

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