Question about estate and income tax

debrSeptember 17, 2006

I know that this is a forum for household finances but I'm hoping that someone may be able to answer a couple of questions for me. My uncle died and left his estate to be divided into parts. His estate is valued at 2.4 million. The attorney says that about one third of the money will have to go towards taxes. Can someone give me a rough "guesstimate" about how much the estate tax and income tax will be on the estate-just want to make sure that the lawyer is giving me correct info. The estate is in Connecticut. Thanks so much.

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davidandkasie

i don't think anyone could tell you that based onteh info you gave. taxes are so tricky that without ALL the details there is no way to even guess.

a guy that worked with us inheireted 9 million in cash and property from his dad's estate. his dad did NOTHING to setup any tax shelters, and Tom had to pay 4.5 million in estate taxes. about 2 years later his grandmother died and left him 5 million in cash, property, and bonds. he only had to pay about 750k on that one since she had the smarts to set it up correctly.

i would say that the best "guesstimate" would be 1/3 to 1/2. you also have to remember any local or state income/inheiretence taxes as well as federal.

    Bookmark   September 18, 2006 at 10:35AM
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devorah

If I remember correctly, the federal estate tax for 2006 is nothing on the first two million and about 50% after that. Connecticut estate tax doesn't kick in for the first two million either - so I think your attorney needs to go back to the drawing board since, only $400,000 is exposed to taxation.

    Bookmark   September 18, 2006 at 2:36PM
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debr

Devorah-Thanks for confirming what I thought is correct. Do you happen to know if income tax will also need to be paid? Guess I'm wondering if that's where the "one third will go to taxes" comes from.

    Bookmark   September 18, 2006 at 8:37PM
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devorah

There will have to be a final income tax filed by the personal representative - but that will only be on the gains made since the deceased last filed

    Bookmark   September 19, 2006 at 12:11PM
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saggysmom

Debr, Federal (and maybe even state) INCOME Tax will need to be paid by the heirs if there are any tax deferred assets (like IRA's or NQ Annuities). This could have been factored in by the attorney. There also may be some probate expenses on top of the taxes which may push that total estate settlement cost to more than his estimated one-third the estate. Since you said no planning had been done I'd bet the estate would go through probate; unless everything was IRA or annuity with a designated beneficiary. This may save on the administrative costs, but brings us back to the Income tax that would be due. Like davidandkasie said, it really depends a lot on the individual situation and there isn't enough information here. devorah is correct - FEDERAL ESTATE TAX exclusion for 2006 is $2mil - but this has nothing to do with the income taxes or possible administrative costs on settling the estate. Good luck.

    Bookmark   September 19, 2006 at 1:54PM
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devorah

I think it depends partly on if the IRAs can just be rolled to the heirs. I am not positive, but I think that is something I read. My mother had no tax deferred accounts so it wasn't an issue for us.

Probate can be expensive. The attorney we hired was really mad when he discovered that although we had him begin the probate procedure, we finished it ourselves. It isn't rocket science. If an attorney takes 1/3 for that, he is really gouging

    Bookmark   September 19, 2006 at 5:37PM
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debr

Thanks everyone for your helpful info. Although I am an heir, I am removed from the process of dividing the estate. My 80 yr old aunt (my uncle's sister) is the executrix and has been handling all the assests. I contacted my deceased uncle's attorney because my aunt wasn't forthcoming with any information about the estate and that's when I was given the info about the taxes. In the list of assests that was handed over to probate (only a will was left, no beneficaries to any accounts) the monies were in stocks and bonds. I am thankful for the gift that my uncle is leaving me, but I'm hoping that the attorney isn't misrepresenting himself and taking advantage of my aunt.

    Bookmark   September 19, 2006 at 11:35PM
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housenewbie

If you're an heir, your aunt should be 'forthcoming.' You have a right to know what you're getting or not getting.

If it's in probate, it might take a while.

    Bookmark   September 20, 2006 at 12:47PM
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