Property that is inherited generally not subject to income taxes

Q. Is there any exemption from income taxes on inherited property?

A. The general rule is that no income taxes are owed on inherited property.

However, certain assets that have not already been subjected to income taxes are considered income to a beneficiary. These assets include retirement accounts and annuities.

Of course, if an estate is large enough (over $12,060,000 in 2022), it could be subject to federal estate taxes.

Q. My daughter who lives in

San Antonio drives an extra car that I own. The car is on my insurance, since it would cost her more to have her own policy. If she has a wreck, could I be held liable if someone were to be injured? How vulnerable am I?

A.

You are probably not too vulnerable.

However, if your daughter has a drug or alcohol problem and you are aware of her addiction or if she has a history of driving accidents, the answer would be different. In that circumstance, you could be held liable for the tort of negligent entrustment.

Negligent entrustment occurs when you entrust a vehicle to someone you know or should have known was unlicensed, incompetent or reckless and that person later becomes involved in an accident.

You should consider giving her the car and telling her to get her own insurance. The difference in cost should be minimal, and that way, you would no longer have any liability for her actions.

Q. My father turns 85 next year. He has an estate of $220,000, but it consists only of bank and brokerage accounts. He sold his home years ago. He is living with me and has no debts. When he dies, will I as the executor of his estate need to probate his will? He is leaving everything to me and my brother.

A. You will probably not need to probate his will.

Probate will be needed only if you and your brother do not automatically receive his accounts after his death. If his accounts are set up as joint tenants with right of survivorship or as payable on death, they will pass directly to the beneficiaries who are named on the accounts, and probate will not be needed.

Only accounts that are in your father’s name alone would need to be probated. You should check with your father as well as his bank and brokerage firms to be sure his accounts are set up to pass automatically and equally to you and your brother when he dies.

The information in this column is intended to provide a general understanding of the law, not legal advice. Readers with legal problems, including those whose questions are addressed here, should consult attorneys for advice on their particular circumstances. Ronald Lipman of the Houston law firm Lipman & Associates is board-certified in estate planning and probate law by the Texas Board of Legal Specialization. Email questions to stateyourcase@lipmanpc.com.