On 28 Jul 2003 20:00:13 GMT, daft[at]hotmail.com (jt) wrote:

- quote -

This is very general - specifics vary by state so you should talk with
someone familiar with both the estate in question and the rules for
that state. Also, what follows pertains only to federal estate rules
- again, states vary.

1. The deceased's final bills are the responsibility of the Personal
Representative. He/she should pay them as soon as possible and
practical. Payment comes from the estate assets and does reduce the
estate for estate tax purposes.

2. Income earned by the decedent (interest, dividends, rents, etc.)
during the probate process (from death until assets distributed) are
handled on the final income tax return for the deceased. That is the
responsibility of Personal Representative.

3. Another Personal Representative job is the Estate Inventory.
He/she lists all assets of the insured and values each as of death.
That valuation goes into the estate tax calculation. And for many of
those things (stocks, bonds, real estate) it also becomes the new tax
basis for those who inherit.

4. Whether or not a Living Trust saves estate taxes varies with the
terms of the actual LT document. It can help. But then so can a
simple will. Personally, I've never thought of a LT as a tax saving
vehicle - it provides does money management services and a few other
benefits.

5. As for taxes to the beneficiaries, the estate tax (if any) has
already been paid by the time they get whatever. So no estate tax is
paid by them. As for income taxes, there is no income tax on an
inheritance. You may owe income taxes as you draw the money out of
investments (like retirement plans or savings bonds), and you will
certainly owe income taxes going forward on any future earnings, but
there is no automatic income tax by virtue receiving an inheritance.

Again, check with someone local and remember the above is federal tax
stuff only.


-HW "Skip" Weldon
Columbia, SC

Appreciate any advice on US tax obligations (and how to minimize)
AFTER the time of death, with living trust and estate to disperse.
Web tutorial references would also be helpful.

I guess the federal estate tax (if any) is fairly cut and dried,
except I gather that leftover bills of the departed one should
NOT be paid, except thru some lengthy formal process where they
will be deductable from the official estate value. Do you in the
meantime give the bill collectors some reassurance so as not to
cause a frenzy of late fees and reminders? How handle refunds?

What about income tax for the departed one, and more than one
inheritor? I gather that much is based on a checkpoint of value
of investments on day of death (try to get this done before next
day's market close, or it can be very hard). Is it treated like
the departed one sold everything at moment of death? What about
stuff in a living trust - any income tax on capital gain even if
not yet sold?

And what about income tax of the inheritors (and how to minimize)?
Who/which pays tax on income of the estate after death but before
exact division of financial assets - both in and out of living
trust? What about when some of it is distributed to one person
but not yet to the other. What about cash vs in-kind distributions;
is one more tax favorable or simpler? Not looking for exact tax
rulings, but general, even fuzzy, principles to get understanding
of the context. Thanks!