Terminal father's taxes

[wasabijin]

What is the name of your state (only U.S. law)? Wisconsin

My father is terminal, at the rate things have been progressing it may only be weeks before the inevitable. He has suffered from mental illness his whole life and has been collecting SSD the past fifteen years, needless to say his income is very minimal. Divorced, no vehicle, no property, no retirement account, his only assets are basic household items in his apartment. This past year we lost our grandfather, his dad, who left behind an inheritance of roughly 75k, to which he has roughly 30k remaining after bills and other expenses. His concern, and my question is, what should we do in-regards to filing his taxes? Wait til after he passes to file? if so, how much should we expect to pay on the inheritance?

 

[LdiJ]

What is the name of your state (only U.S. law)? Wisconsin

My father is terminal, at the rate things have been progressing it may only be weeks before the inevitable. He has suffered from mental illness his whole life and has been collecting SSD the past fifteen years, needless to say his income is very minimal. Divorced, no vehicle, no property, no retirement account, his only assets are basic household items in his apartment. This past year we lost our grandfather, his dad, who left behind an inheritance of roughly 75k, to which he has roughly 30k remaining after bills and other expenses. His concern, and my question is, what should we do in-regards to filing his taxes? Wait til after he passes to file? if so, how much should we expect to pay on the inheritance?

Possibly nothing...possibly standard income tax rates. It all depends on the source of the inheritance. If it came from retirement accounts it will be taxable. If it came from a savings account it will not be...and all kinds of other possibilities. There is no advantage in waiting to file, and every potential disadvantage to delay it past April 15th.

 

[FlyingRon]

The federal limits on estate taxes are very high (millions) and there's no inheritance tax.
There is no Wisconsin estate or inheritance tax anymore.

As Ldij points out, if the asset was in a tax-deferred plan (IRA, 401k, etc...) any proceeds from that would be taxable (or could be rolled over). It sounds like this is not the case.
Pretty much anything that's left from the estate after the debts are taken care of passes to the heirs without tax implications. You will need to file tax returns (if he had any income to speak of) for the years he was living and then possibly one for the estate, but it's just paperwork.

 

[wasabijin]

Thank you both for the quick replies. 50k he inherited from a trust fund and 25k had come investments. Does that mean only the 25k would be taxable?

 

[FlyingRon]

Thank you both for the quick replies. 50k he inherited from a trust fund and 25k had come investments. Does that mean only the 25k would be taxable?

The investments would only be taxable if they were in a tax-deferred thing like an IRA or a 401k. If he just had held them outside of one of these plans, they aren't taxable. The basis of the assets steps u at his death so no capital gains either.

 

[wasabijin]

Thanks again. I've been reading up more on his situation and it has put our minds at ease. As it is, he doesn't file taxes since his only income has been from SSD and it looks like will continue that trend this year as well.