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Inheritances
Q: My husband and his siblings are already fighting about their inheritance, and their mother isn't even dead yet--far from it. But she's promised various heirlooms to more than one person and let it slip that she plans to divide her money according to the neediness of her children. We feel we're being punished for being successful and careful with our money, while my husband's brother, who lives on credit cards and floats from job to job, is going to be rewarded. What can we do to change her mind?
A: Not a thing. You need to change your mind about what you do and don't deserve.
Your mother-in-law can do anything she likes with her money and her possessions. Some parents divide their estates equally, others based on need; some use money to reward or punish their children for the life choices they've made. A few decide "the heck with all of you" and leave it to charity; more than a few decide not to deal with estate planning at all and let state law determine who gets what after they're gone. It's up to the parent, not to you, and any sense of entitlement you have will only cause you unnecessary pain about a process over which you have no real control.
If it makes you feel any better, your money skills and success mean you will probably have more than enough to get you through the rest of your life, even without an inheritance, while your brother-in-law is likely to blow the money as he's blown everything else.
Instead of fostering more resentment, you could be a force in reducing family squabbling by encouraging your mother-in-law to come to some decisions about who gets which heirlooms. Consider discussing this first with the siblings and approaching her together, rather than taking it on yourself to broach the issue (and perhaps raise suspicions and resentment among other family members). She could detail this information in her will, make a handwritten list or even affix labels to the items in question with the intended beneficiaries' names on them. As a family, you can emphasize that you only want to reduce the possibility of hurt feelings or disagreements after she goes.
She might resist this, of course. It's one thing to promise a bauble in a moment of generosity--"Of course I want you to have it, darling!"--and another to formalize these wishes. More than a few superstitious people believe that even thinking about wills and bequests could bring on the Grim Reaper. Others don't want to give their heirs a sense of ownership. All you can do is raise the issue.
When she does die, you will still have one another. Wouldn't you rather cement your relationships with one another than risk losing that bond through fighting?
Q: I inherited stock when my mother died in December and recently sold it for $100,000. Will I have to pay the capital gains tax for year 2000 when I file my return? Do I need to know the value of the stock at the time she purchased it 50 years ago in order to calculate the tax?
A: My condolences on the loss of your mother. You don't need to know what she paid for the stock to determine your taxable gain; because you inherited the stock, you most probably will use the value of the shares on the day she died as your "tax basis." That basis is what you subtract from the sale price to determine your tax. You'll pay capital gains taxes of 20% on the profit, plus California state income tax of up to 9.3%, and you may need to make an estimated tax payment by July 17, depending on your tax situation. I'd encourage you to talk with a tax advisor.
A big item like that could increase your chance of audit and you would benefit from getting professional help.
Q. I am 82 years old and very close to a couple that I consider to be like my own family. They take care of me when I need them and I consider their children to be my grandchildren. Quite a few years ago I put aside some money in certificates of deposit for the children. I take the interest out to live on, and occasionally add more money, so the total is now about $15,000 each. When I die, will they have to pay tax on this money that I gave them?
A. What a kind and generous gesture. The family is lucky to have you, as you are to have them.
If the CDs are in your name, you haven't really given the money to them yet. Be clear in your will where the money is to go, and while the children are minors, you should name their parents as custodians. Even without a will, you can make the accounts payable on death to the parents as custodians for the children. Ask your bank for details on how to set this up.
If you have put the money in the children's names already, you probably have created tax and possibly legal problems for yourself by taking out the interest. Check with a professional tax advisor for help. Your adopted grandchildren won't have to pay taxes on money they inherit from you, but they will have to pay income taxes on any interest the money earns after they get it.
Gifts and gift taxes
Q: Three years ago, my father made his bank account joint by putting my name on it. He is now 89. Recently, I took all the money out and put it in my name only. I was told I had to file a gift tax return because the amount was more than $10,000. Is this correct, even though the account was in both names?
A: A gift tax return needs to be filed. But more important, just what the heck do you think you're doing?
Most parents put an adult child on their accounts so that someone will be able to pay the bills if the parent becomes incapacitated. It's not an invitation to raid the piggy bank.
(Some parents also use joint accounts to avoid probate, the often costly court process that ensues after a death. That may not be the smartest idea; it's just as easy to make the account a "pay on death' account and name the children as beneficiaries. That avoids both probate and the possibility that your child will do what this one has done.)
Q: My husband and his siblings are already fighting about their inheritance, and their mother isn't even dead yet--far from it. But she's promised various heirlooms to more than one person and let it slip that she plans to divide her money according to the neediness of her children. We feel we're being punished for being successful and careful with our money, while my husband's brother, who lives on credit cards and floats from job to job, is going to be rewarded. What can we do to change her mind?
A: Not a thing. You need to change your mind about what you do and don't deserve.
Your mother-in-law can do anything she likes with her money and her possessions. Some parents divide their estates equally, others based on need; some use money to reward or punish their children for the life choices they've made. A few decide "the heck with all of you" and leave it to charity; more than a few decide not to deal with estate planning at all and let state law determine who gets what after they're gone. It's up to the parent, not to you, and any sense of entitlement you have will only cause you unnecessary pain about a process over which you have no real control.
If it makes you feel any better, your money skills and success mean you will probably have more than enough to get you through the rest of your life, even without an inheritance, while your brother-in-law is likely to blow the money as he's blown everything else.
Instead of fostering more resentment, you could be a force in reducing family squabbling by encouraging your mother-in-law to come to some decisions about who gets which heirlooms. Consider discussing this first with the siblings and approaching her together, rather than taking it on yourself to broach the issue (and perhaps raise suspicions and resentment among other family members). She could detail this information in her will, make a handwritten list or even affix labels to the items in question with the intended beneficiaries' names on them. As a family, you can emphasize that you only want to reduce the possibility of hurt feelings or disagreements after she goes.
She might resist this, of course. It's one thing to promise a bauble in a moment of generosity--"Of course I want you to have it, darling!"--and another to formalize these wishes. More than a few superstitious people believe that even thinking about wills and bequests could bring on the Grim Reaper. Others don't want to give their heirs a sense of ownership. All you can do is raise the issue.
When she does die, you will still have one another. Wouldn't you rather cement your relationships with one another than risk losing that bond through fighting?
Q: I inherited stock when my mother died in December and recently sold it for $100,000. Will I have to pay the capital gains tax for year 2000 when I file my return? Do I need to know the value of the stock at the time she purchased it 50 years ago in order to calculate the tax?
A: My condolences on the loss of your mother. You don't need to know what she paid for the stock to determine your taxable gain; because you inherited the stock, you most probably will use the value of the shares on the day she died as your "tax basis." That basis is what you subtract from the sale price to determine your tax. You'll pay capital gains taxes of 20% on the profit, plus California state income tax of up to 9.3%, and you may need to make an estimated tax payment by July 17, depending on your tax situation. I'd encourage you to talk with a tax advisor.
A big item like that could increase your chance of audit and you would benefit from getting professional help.
Q. I am 82 years old and very close to a couple that I consider to be like my own family. They take care of me when I need them and I consider their children to be my grandchildren. Quite a few years ago I put aside some money in certificates of deposit for the children. I take the interest out to live on, and occasionally add more money, so the total is now about $15,000 each. When I die, will they have to pay tax on this money that I gave them?
A. What a kind and generous gesture. The family is lucky to have you, as you are to have them.
If the CDs are in your name, you haven't really given the money to them yet. Be clear in your will where the money is to go, and while the children are minors, you should name their parents as custodians. Even without a will, you can make the accounts payable on death to the parents as custodians for the children. Ask your bank for details on how to set this up.
If you have put the money in the children's names already, you probably have created tax and possibly legal problems for yourself by taking out the interest. Check with a professional tax advisor for help. Your adopted grandchildren won't have to pay taxes on money they inherit from you, but they will have to pay income taxes on any interest the money earns after they get it.
Gifts and gift taxes
Q: Three years ago, my father made his bank account joint by putting my name on it. He is now 89. Recently, I took all the money out and put it in my name only. I was told I had to file a gift tax return because the amount was more than $10,000. Is this correct, even though the account was in both names?
A: A gift tax return needs to be filed. But more important, just what the heck do you think you're doing?
Most parents put an adult child on their accounts so that someone will be able to pay the bills if the parent becomes incapacitated. It's not an invitation to raid the piggy bank.
(Some parents also use joint accounts to avoid probate, the often costly court process that ensues after a death. That may not be the smartest idea; it's just as easy to make the account a "pay on death' account and name the children as beneficiaries. That avoids both probate and the possibility that your child will do what this one has done.)
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