If the estate is over 1MM in total. I recommend getting an attorney who charges by the hour and not percentage. Can save you A LOT of money.
Inheritance tax in Iowa
- Thread starter dmclone
- Start date
That can have negative issues. See an attorney if you are considering it to have them give you all the bad possibilities that could happen.
Well, if there's a falling out with said person in the future, it'd be a huge PITA. Or if that person is sued your property could be at risk.
I don't get car loans and it will be a long time before the inheritance arrives. I am thinking about using it to prune my trees though
Wait til you get one with an unvested contingent remainder that constitutes a taxable share where you need to defer tax. You haven't lived til you do one of those!
Second favorite was a sprinkle trust with several beneficiaries who were not lineal descendants. It took the IDR over 9 months to process the return. Fun times.
It will be nice for the Iowa Inheritance tax to be gone. Nebraska also has one. That was more fun to figure out when I first started doing those. Iowa at least has a full set of regs.
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Nope. Joint property is taxed as a transfer. Unless of course the joint holder is a lineal descendant, spouse, lineal ascendant, or charity.
The Iowa tax reaches all sorts of transfers that take effect at death including joint accounts, beneficiary designations on bank accounts or investment accounts, etc.
As earlier posted up thread, it doesn't tax things that will be taxed to the beneficiary for income tax purposes (like traditional retirement accounts). It also generally doesn't tax life insurance proceeds.
Yes, I know I'm not Curt.
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That just says that you don't guarantee that there isn't any issues with the property before that date, it would not change anything with ownership (unless you changed it then) or with inheritance situations.
If you’re a lineal descendent there is still the issue of capital gains tax, so another reason why it would not be better to QCD a relative and add them with you as an owner to your property. If you inherit the property, and then sell I don’t believe there are much if any capital gains taxes. But if you add your family member to the property, I think the capital gains would be based on the initial value when the family member was added to the property. Tax peeps, feel free to correct me if I’m wrong.
I went through this situation a couple years ago with my mom's estate. When my mom bought the house, the attorney added my name to the house with the rational that if she went to a care center, I could liquidate it for her more easily and free up funds. Well, she went to the care center, but didn't need the funds and was only there for a couple months.
Here is what I ran into: I had capital gains on it since I didn't get to use the stepped up basis on it, I also got to explain why the house went solely to me and then explain that it would not be an equal split from the sale since I have those taxes on it. When I went to sell it, the realtor said I had to fill everything out since I was an owner and I could not mark "I don't know" for all the points about knowledge of the house. Well, guess what, the realtor found a sue happy person and even though the roof didn't leak and even an inspector said it was fine but best to replace in a year or two, they brought in a crap contractor to change the bathroom and they tore all the pipe sealing loose. They then claimed that the roof leaked (well duh because they caused it) and they would be happy to replace the roof while there (basically forced more business for them). So the nut jobs then sent me, the realtor, and the inspector a letter threatening to sue if we didn't give them X amount of money by a certain date. If it's an estate, you don't have to fill paperwork out like an owner and can avoid those issues.
Man, I need to talk to my parents about their setup. This sounds like a nightmare.
Just get a power of attorney for the child that is trustworthy. It would allow the same stuff basically.
POA's are a critical piece, especially given the changes to the conservatorship and guardianship regime in Iowa. (I know that wasn't your issue, but it is huge nonetheless).
This is right in principle. Better to make arrangements to maximize stepped up income tax basis because that is where the real pain exists now. With current amounts, the Fed Estate tax impacts few people and the IA inheritance tax is on the way out. Why generate income tax liability to avoid two minor things. You can still avoid probate with a good revocable trust set up. Also, in some limited situations, a reserved life estate can work, though that can get messier.
This is the correct answer-- it depends on how the Will is structured. In my experience, the Estate (assuming an Estate was opened) usually takes care of filing the return and paying the tax. Depending on the wording of the Will, the Executor will then either take it directly out of your share at the time of distribution or will simply take the taxes paid on behalf of the beneficiaries off the top of the estate before the division/distributions.
But as @CloneLawman has stated every scenario is different and requires the assistance of the probate attorney. You often get into beneficiaries receiving non-probate assets that are also subject to inheritance tax but not coming directly from the Estate. Furthermore, some assets aren't subject to inheritance tax. So the preparation of the return and calculation of the tax is fairly complicated and is different in each Estate, and the takeaway here is to utilize the probate attorney's guidance.
