Inheritance advice needed.
 

Hi everyone. I don't post much but lurk here every day. I am amazed of the depth of knowledge here on the board. So I thought I would ask the brain trust.

My Dad passed away a few weeks ago. He was a great man. An accountant at GM in Oh for the duration. He took care of my mom for 30 year after she was diagnosed with an MS type illness. Shortly after she passed we realized that had had dementia and had to put him in a care facility. He was there the past five years. We will have to put off the celebration of life until better times.

So I will be getting around $200k. We really don't need the money now but would like to have it available incase of emergencies ( wife is a pathologist and already her group has had to take a 40% cut).

So is there anywhere i should put the money so I can limit the tax burden? We are not money savvy I will gladly take any advice.

(please excuse any grammatical errors. not my strong suit)

Thanks

Dave

Sorry to hear about your dad.

I would consult my accountant/tax attorney on how to best shelter the money from inheritance taxes etc. if you put it in the wrong account you may be looking at 40-50% tax depending on your tax bracket, DESPITE the fact your dad already paid tax on that money.

Good Luck

I'm not a CPA, but we went thru this with my wife's parents and my dad a few years ago. If I remember correctly, for a relatively small amount of money like $200k I don't think you will have to pay any inheritance taxes. You probably should verify this with a local CPA or money manager. While it is always tough to lose a parent, give it some time and mostly what you will remember will be the good times!

there are No fed taxes on estates now 200k is way under the old rules

there maybe state taxes in one or both states check your local laws

If estate taxes are to be paid, they are paid by the estate, not you. They are paid on the entire value of the estate, not what you receive as an individual.

I don't think Ohio has an estate tax any more. The feds don't tax on a little over the first $11 million of the estate. There are ways to increase the federal exception if your dad used a competent estate planning lawyer. Does he have a will? Who is handling the estate? Is there real property involved or just investments and personal possessions? What state was he in when he died and where is the property? The state where real property is located controls the laws relating to that property. The law of the state where your dad died will controls most of the rest.

Unless the estate is quite large, the estate won't pay any federal tax for sure. But what you receive as your inheritance will be net taxes anyway.

I think Michigan inheritence tax doesn't kick in until $5M.

No state inheritance tax in Michigan.

Sorry to hear about your father's passing, Dave. You paint a picture of a very honorable man that you are proud of.

Best wishes going forward, sir!

I stand corrected, MRM (but only if the decedent died after 9/30/93).

To OP. Do your self a favor and remove idenifying info in your post. You never know who is reading!

No other advice. My condolences.

^this

Take your name out of your signature. There are people searching for this exact type of thing.

I believe it's the state that his father resided in. That might not be the state in which he died, or where properties might be located.

My condolences.

If the wife does not yet know, hookers and blow.

My advice? Buy a good safe and stuff it full of cash!

That may sound like I'm joking but if you factor in taxes, interest and inflation right now
you're actually better off stuffing money into a mattress than leaving it in the bank.

Another option is an investment property. 200k would make a great deposit on a rental property.

The laws of the state where real property is located controls over that real property. The will or trust determines how the property is disposed of, but unless the property is already in a trust, the property has to be probated in that state.

I’m assuming the OP’s father passed away in the same state he lived in. I suppose he could have died in a hospital over a state line, but yes, the laws of the state where he had his primary residence when he died will control over the estate. That’s why I asked what kind of property is in the estate and where it is located.

Apologies for my assumptions...but my guess is that you are retired, and your wife is a bit younger and will still be working for a few more years.

At this point...if you have something left on a mortgage - pay off as much as you can (hopefully all of it) while still leaving you with something. Then pay down as much as you can on any higher interest accounts (credit cards, et al), as these truly suck dollars away needlessly.

Hopefully you will still be able to sock something away (30 to 50K?) for emergencies. Anything left after this? Your choice...a few stocks very low right now if you want to gamble. Do an upgrade to your dwelling that you've been putting off, but which will hopefully add some value. Anything left after this? Be creative! Fix up your favorite ride...plan a great trip...etc.

My guess also is that I don't have quite the amount of liquidity as you...I am recently retired and my wife still works as a nurse practitioner. When I recently received a long-awaited, long past due divorce settlement, I put most of this into what was left of our home mortgage, and paid down as much as possible on interest heavy accounts.

Money left over has gone into a large DIY v-groove ceiling installation (nearly completed), and a partial tear down and rebuild of my 1987 944. On top of this...we've carefully socked away as much as possible towards our health savings account.

The 401K? My wife still contributes the maximum allowable amount to hers...although to be honest its been a bit nerve-wracking to even open the statement envelopes lately! A bit of cash rolled up in the mattress might actually make some sense these days!

Sorry to hear about your dad.

Another thing to consider, assuming you're married, is whether or not to co-mingle the money. Your marriage may be perfect and last forever, but on the other hand...

I made sure to keep some inheritance I had separate in my previous marriage and was happy I did come divorce. I still spent quit a lot of it with my wife, but what I didn't spend I kept separate.

My cousin on the other hand, did not. His wife got half of everything they had and most of what they had came from grandpa.

(yes, edit out your personal details!)

I'm sorry for your loss. afaik, unless he specifically put aside assets in a separate trust, the bulk of your father's estate will probably have to go through probate court to ensure there are not any outstanding creditors wanting a piece of his estate. An estate attorney who handles only these types of cases will help with the details and make the process smoother. You might be able to get leads from family planners, friends, etc. Ask around.

With Roth IRAs you pay the taxes up front for long-term investing. The stock market still hasn't hit bottom yet so that is something to consider in turning cash into investment. The rule of thumb I've heard (Suzy Ormand?) is to stay diversified and have 1/3 cash. 1/3 stock, 1/3rd bonds or other.

Hello neighbor! SmileWavy

Sorry to hear about your father. I hope he had a good life and a peaceful passing.
As you can see from the responses here, this can be complicated, with lots of moving parts. My suggestion is to look up a fee-only financial advisor in this area. Mine retired, and I don’t have one to recommend. A little Google research should help you find a good one.

Sorry for your loss.
For others reading this, when a parent dies, the remaining parent shouldn’t hold money in his/her own name alone.
At a minimum, a child should be added as a joint account holder. Or a Payable on Death instruction given.
That way when he/she passes the money can simply be withdrawn.