Drama might not be resolved until after death
Dear Liz: My mother is turning 92 this month. Due to a dispute, my mother amended her will last year and stated that my inheritance had to be used for a certain purpose. My brother sent me the amendment and told me he will enforce my mother’s wishes. He also told me that I had to send a letter to him after my mother dies if I do not want anything from her trust. Is this accurate? I want to put it in writing before my mother dies that I do not want a penny from her trust. I want to be completely estranged from my family and their control. Do I need a lawyer to do this, and do I have to wait until her death to put this in writing?
Consider showing the email to an experienced estate planning attorney to find out how much actual control your mother will have from beyond the grave. There may be workarounds that you (and your mother) haven’t considered.
If you decide you don’t want the money after her death, you can “disclaim” it in the letter your brother described. While it may seem more satisfying to make the point while your mother is still alive, you cannot force her to disinherit you any more than she can force you to take the money if you don’t want it.
Dear Liz: I have received an inheritance of $445,000 from a relative who died out of the country. Do I have to pay income tax on this money?
If you inherited from someone who was a U.S. citizen who lived abroad, then that person’s estate may be subject to U.S. estate taxes. The estate would have to be quite large, though. In 2017, estates worth less than $5.49 million per person were exempt from the tax. In 2018, the amount was raised to $11.18 million.
If you had paid any taxes on your inheritance to a foreign government, you could take a tax credit on your U.S. tax return for that amount.
Otherwise, you probably won’t owe any taxes. The federal government and most states don’t levy inheritance taxes on people who receive bequests. The exceptions are Iowa, Kentucky, Nebraska, Maryland, Pennsylvania and New Jersey, which do levy taxes on inheritances. All exempt spouses, and some exempt other immediate relatives.
Dear Liz: I have a terminal illness and have less than a year to live. My wife and I are in our 80s and don’t own anything: no cars, no homes. My wife has an IRA worth $140,000 that pays us $2,000 a month, and she has a small pension of $1,400 a month. We receive $3,900 from Social Security, for a total monthly income of $7,200. We have $72,000 in credit card debt that is strangling us. I told my wife that after I’m gone she should simply ignore that debt and advise creditors that I have passed away. Or should we attempt to file bankruptcy now?
Your return address shows you live in California, which is a community property state. Debts incurred during marriage are generally considered joint debts, so expecting creditors to go away after your death is not realistic.
Your wife’s retirement also could be at risk because California has limited creditor protection for IRAs. Federal law protects IRAs worth up to $1,283,025 in bankruptcy court, but outside bankruptcy, creditor protection depends on state law. In California, only amounts “necessary for support” are protected.
You really need to consult with a bankruptcy attorney to discuss your options. You can get referrals from the National Association of Consumer Bankruptcy Attorneys at www. nacba.org.