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emc011075, Tax adviser
Category: Tax
Satisfied Customers: 3173
Experience:  IRS licensed Enrolled Agent and tax instructor
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This doesn't satisfy the question at hand. Does the transfer

Customer Question

This doesn't satisfy the question at hand. Does the transfer occur at the transfer date to the children or due to the condition of the life estate does transfer occurs upon death of the second parent?
OK I am also a tax professional (retired) What additional facts do you need to know?
Submitted: 1 year ago.
Category: Tax
Expert:  emc011075 replied 1 year ago.

Hi, Gene. My name is ***** ***** I will be happy to help you.

What doesn't satisfy the question at hand?

Expert:  emc011075 replied 1 year ago.

Are you talking about inheritance transfer date for tax basis?

Customer: replied 1 year ago.

Yes or transfer conditional to life estate?

In other words, there are two possible basis dates and values

1, The date the property was transferred subject to the Life estate restriction or the subsequent DOD of the second parent. This would permit a higher basis (Date of death of Mother).

Expert:  emc011075 replied 1 year ago.

The date of inheritance is the date the children gain unrestricted access to the property. In the case of life estate, the second partners/spouse inherits the second half of the property from the first partner/spouse and the children inherit the entire property from the second partner/spouse/parent. Children get the step up basis of the second parent.

Expert:  emc011075 replied 1 year ago.

The mother inherited 50% of the property from the father, so after his death she owed 100% and the children inherited 100% after her death.

Customer: replied 1 year ago.

Let me make this clear, what you are saying is that the transfer basis to the children has no effect on basis because of the Life estate restriction on the transfer and that the children are still entitled to a step-up based on the second second parents death. Would you be able to reference that code, regs, court case(s) if any?

Expert:  emc011075 replied 1 year ago.

Yes, that's correct. Until the children gained unrestricted access to the property with the rights to sell or dispose it, they didn't have tax basis, they didn't own the property for tax purposes. Yes, there are tax codes and references but I would need some time to do the research to find them. 24 - 48 hours?

Customer: replied 1 year ago.

Thank you for your assistance.

Expert:  emc011075 replied 1 year ago.

You're welcome. Is there anything else I can help you with today?

And if this answered your question, please take a moment to rate my response so that I may receive credit for assisting you today. You find the rating bar on the top of the page – 5 stars. However, if you need clarification, or want to discuss this issue further, let me know. Thank you.

Expert:  emc011075 replied 1 year ago.

The title that was held by the deceased person passes automatically to the surviving joint owners, not to the heirs of the deceased person or their relatives or persons named in his or her Will or Trust. The right of survivorship continues until the sole survivor owns all of the property.

- when the first parent dies, the title passes directly to the second spouse, which means children are NOT inheriting anything at that point. The solo and only beneficiary is the surviving spouse. Children becomes beneficiaries of the property after the second spouse death, NOT before.

Upon the death of one of the joint tenants the property automatically becomes the property of the surviving joint owner.

- once again, the entire property is transferred to the surviving spouse, not the the children.

When one passes away their heirs received a "step-up" in their basis. The tax basis for the heirs is the value of the property on the date of death -- not on the date the property was acquired.

- since children are not inheriting any property before the second survivor dies (no title is transferred to children before after mother death), the children receive step up basis of FMV of mother's death. That's when they become legal owners of the property.

A joint tenancy interest cannot be willed to anyone, because your interest ceases at your death and passes automatically to the surviving joint tenant(s).

Note that when the last surviving person who was a joint tenant dies, there is no automatic survivorship right because there are no other joint tenants. The property passes to that person's heirs.

- when the last survivor dies, only than the property passes to heir.

It all comes down to this. With JTWROS children have no rights to the property before the last survivor dies. The children are not inheriting anything from their father, since the title of the father’s half is passed to the mother, not to the children. The property is automatically transferred to the next survivor, the mother, regardless what’s in the will or trust.

Now back to the basis in the property. When you inherit a property, your basis will be fair market value of the property on the day you legally inherit the property. Since the children are not inheriting anything until mother’s death, their basis will be the fair market value of the property on day of their mother’s death.

Does it helps?