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skiphaynes

Junior Member
What is the name of your state? New Jersey
My wifes step father died and in his will he left her the house, van and a large screen TV with a futher stipualation for the reminder of the estate to be split 50 percent to his children (3) in California and 50 percent to the step children (7) in New Jersey. However my wife the executor went to find out about the IRA and discover herself to be the sole beneficiary. So taking IRA out of the estate leaves things as follows.
Bank acounts and stocks and bonds only equal enough to pay for the funeral and a 21,000 dollar home equity loan left unpaid. My wife in spite of the fact that she would own the home is considering selling the house and giving money to the siblings. Will we have any tax libility on the sale of the house?
 


wdlsguy

Member
My wife in spite of the fact that she would own the home is considering selling the house and giving money to the siblings.
That's quite nice of your wife. It seems she was favored by her stepfather. Was she his caretaker?

Will we have any tax libility on the sale of the house?
Your wife's basis will be the value of the house on the date of her stepfather's death, so the capital gains should be fairly small.

How much do you expect the house to sell for? Your wife might eat into her gift tax exclusion when she gives money to the siblings.

IANAL
 

skiphaynes

Junior Member
Uniformed

I assume by basis you mean that the value of the house at the time of death is the tax free inheritance and any value increase afterwards is subject to capital gains? He just passed on the 29th of April so we have yet to even appraise the house but I would guess at 150,000. What is gift tax exclusion?
 

wdlsguy

Member

skiphaynes

Junior Member
Thank you I will look into that since we will need deductions with having to cliam the IRA as income. Yes she was a fovorite and spent time with him thankfully care prior to his death was really short.
 

wdlsguy

Member
I don't believe your wife will be able to deduct the money she gives to her siblings from her income tax.

IANAL
 

anteater

Senior Member
skiphaynes said:
Thank you I will look into that since we will need deductions with having to cliam the IRA as income.
Why not have wife retitle the IRA as a beneficiary (often called a "stretch") IRA, that is, something like "The IRA of [stepfather's name], deceased, for the benefit of [wife's name], beneficiary."

Wife will have to take distributions each year based upon her life expectancy. But that sure beats taking a lump sum distribution and the resulting income tax hit. With any luck, growth of the IRA will be greater than the annual distributions, leaving a nice sum when retirement comes.

Taking money out of tax-deferred accounts is easy. Getting money into them is a lot tougher.
 

skiphaynes

Junior Member
Again I guess I don't know what a gift exclusion is. My wifes step-father was not age 701/2 and his wife is already deseased therefore my wife only has the five year option or the lump sum.
 

skiphaynes

Junior Member
Again I guess I don't know what a gift exclusion is. My wifes step-father was not age 701/2 and his wife is already deseased therefore my wife only has the five year option or the lump sum.
 

anteater

Senior Member
skiphaynes said:
Again I guess I don't know what a gift exclusion is. My wifes step-father was not age 701/2 and his wife is already deseased therefore my wife only has the five year option or the lump sum.
Those are not the only options per tax law. As sole beneficiary, your wife can "stretch" the IRA. Take a look at Pub 590.
http://www.irs.gov/pub/irs-pdf/p590.pdf

Or have you run into an IRA custodian that is too lazy to update their IRA Agreements to what is allowable by the IRS?

Any individual is allowed to gift $12,000 annually to as many other individuals as they please without having to report anything to the IRS. (States may have different requirements, but most that I know of follow federal tax law.) More than $12,000 to any individual in any one year and a gift tax return needs to be filed. Which does not mean that gift tax is actually due since there is a $1 million lifetime gift tax exclusion for reportable gifts. All that filing a gift tax return does (until you hit that $1 million lifetime exclusion) is eat up a portion of the unified estate tax credit.
 

lwpat

Senior Member
Your wife can simply refuse the items left to her in the will. Then everything will be divided to the others. With their approval, she can purchase the van and TV from the estate at a minimum price. This should not be a problem since otherwise they get nothing.
 

skiphaynes

Junior Member
Hey thank you. I looked up the 'Stretch' IRA and that is an option for leaving it there. And again I will consider the limit on gift tax.
 

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