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Tax Obligations When Administering an Estate

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  • 06-23-2014, 04:14 PM
    kunrj
    Tax Obligations When Administering an Estate
    My question involves estate proceedings in the state of: New Jersey

    My partner passed away a few weeks ago and I already went to the Surrogate's Court with his will and received a certificate indicating that I am the executor of his estate. I have never done this before so I am not sure how to proceed. I am looking for a lawyer now. I have the following questions:

    1. I was told to get an EIN number from IRS so that I can open a checking account that I can deposit checks that might come in under his name. I think I saw that I could get the number online. Is this correct? Once I open a checking account for his estate, can I move money from his current checking and saving accounts into this account to pay for expenses, e.g., funeral expenses, bills, etc.

    2. Social Security sent me Form SSA-172-F4, Claim for Amounts Due in the Case of a Deceased Social Security Recipient. Does this mean that Social Security might send a check or something for his estate?

    3. Although we were registered as domestic partners in NJ, we were not married or in a civil union relationship. People already told me that I would not have to pay the inheritance tax but I will have to pay the NJ estate tax if the estate is more than $675K. We have been living together 28 years and we were going to marry a week after he passed. Is there anything I can do to reduce the amount of the estate tax?

    4. Do I need to get the house appraised or can I use the value of the house that is being used for the personal property tax?

    Thanks,

    RJ
  • 06-23-2014, 05:05 PM
    adjusterjack
    Re: As a New Executor, I Have Questions About Probate Proceeding
    Condolences

    Quote:

    Quoting kunrj
    View Post
    1. I was told to get an EIN number from IRS so that I can open a checking account that I can deposit checks that might come in under his name. I think I saw that I could get the number online. Is this correct?

    Yes.

    Here's a link to it.

    http://www.irs.gov/Businesses/Small-...r-(EIN)-Online

    Quote:

    Quoting kunrj
    View Post
    Once I open a checking account for his estate, can I move money from his current checking and saving accounts into this account to pay for expenses, e.g., funeral expenses, bills, etc.

    Yes.

    Once you present your Letters of Administration or Letters Testamentary (it's called different things in different places) to his bank you can close the account and have the bank issue a check to The Estate of _____ for the balance and then deposit it into the estate account.

    Quote:

    Quoting kunrj
    View Post

    2. Social Security sent me Form SSA-172-F4, Claim for Amounts Due in the Case of a Deceased Social Security Recipient. Does this mean that Social Security might send a check or something for his estate?

    Probably.

    The SS death benefit is $255. If there is no beneficiary and you were not married it's likely to be made out to The Estate of ______.

    Quote:

    Quoting kunrj
    View Post

    3. Although we were registered as domestic partners in NJ, we were not married or in a civil union relationship. People already told me that I would not have to pay the inheritance tax but I will have to pay the NJ estate tax if the estate is more than $675K. We have been living together 28 years and we were going to marry a week after he passed. Is there anything I can do to reduce the amount of the estate tax?

    I don't think so. You would be wise to talk to a tax pro about that. But I think "it is what it is."

    Quote:

    Quoting kunrj
    View Post

    4. Do I need to get the house appraised or can I use the value of the house that is being used for the personal property tax?

    The assessed value generally has nothing to do with the market value.

    If you were the one named in the will to inherit all of his estate it would be worth your while to have a professional appraisal so you don't short change yourself on the sale price, or at least have a realtor do a market analysis or look on Zillow (which is not always accurate but will give you a starting point and you can see what recent sales have been nearby). Once you've determined an appropriate market value so you can put it up for sale, that value will have to pass muster with a lender's appraiser if a prospective buyer needs a mortgage and the lender won't care how you arrived at your sale price.

    PS: I handled my mother's estate through the NY Surrogate Court so I have a bit of experience.
  • 06-23-2014, 08:48 PM
    kunrj
    Re: As a New Executor, I Have Questions About Probate Proceeding
    Thank you very much for the answers. At this point, I have no plan to sell the house and I am living in it now. I might a year from now but I don't have a plan at this point. I can understand that if I want to sell the house now, I would want to have it appraised with a higher value, but that would mean paying more estate tax. I called and as a person from the NJ tax division and she said that I could submit the value of the house based on the appraised value for personal property tax, but if the value is not a good representation, they could challenge it.
  • 06-23-2014, 09:25 PM
    adjusterjack
    Re: As a New Executor, I Have Questions About Probate Proceeding
    Quote:

    Quoting kunrj
    View Post
    Thank you very much for the answers. At this point, I have no plan to sell the house and I am living in it now. I might a year from now but I don't have a plan at this point. I can understand that if I want to sell the house now, I would want to have it appraised with a higher value, but that would mean paying more estate tax. I called and as a person from the NJ tax division and she said that I could submit the value of the house based on the appraised value for personal property tax, but if the value is not a good representation, they could challenge it.

    Check Zillow and put in the address and see what Zillow says is the market value. If that's within a few percent of the assessed value, then use the assessed value. Print out the Zillow page. Printing out a webpage generally inserts a date on the page and you'll want to keep that in your files.

    I suspect that it's easy enough for the taxing authority to check Zillow as well, so if the market value is higher you might have to bite the bullet and pay the tax.

    I guess one advantage to paying tax on a higher value now is that you'll pay less capital gains tax if you sell the house in less than the 2 year period as your primary residence that would allow you to avoid the capital gains tax on gain of up to $250,000.

    Are you getting the house free and clear with no mortgage left on it?
  • 06-24-2014, 06:27 AM
    kunrj
    Re: As a New Executor, I Have Questions About Probate Proceeding
    The house has a small amount of mortgage left on it. I will pay it off so that it will be free and clear when I own it. Thanks for reminding me about the $250K capital gains tax. I will get the house appraised and see what an appraiser thinks the value of the house is and go from there.

    Thanks,

    RJ
  • 06-29-2014, 06:51 PM
    kunrj
    Re: As a New Executor, I Have Questions About Probate Proceeding
    I now have more forms to fill out and one of them is the W-9 form. This was sent by an investment company that my partner has mutual funds with them. I told them that I want all the funds in his account to be liquidated and send to me. Can someone explain to me what the W-9 form is? The Tax Identification Number to be used on this form is my SSN, right? When I spoke with a representative on the phone, she didn't seem to know much. She even told me that I might not get anything because of the NJ laws. I tried to tell her that at least 50% of the value of the account could be released to me but she didn't know anything about that. I would appreciate if someone can explain what the W-9 form is being used for.

    Thanks,

    RJ
  • 06-29-2014, 07:37 PM
    harrylime
    Re: As a New Executor, I Have Questions About Probate Proceeding
    Is the account a probate asset? Or are you a designated beneficiary on the account?

    Since you have asked them to liquidate the mutual funds, they will have to send a 1099 to report the sale. Assuming that the account is part of the probate estate, the estate EIN would be proper.

    (Remember to look up the NAV of the mutual funds on the date of your partner's death so that you know what the stepped up cost basis of the assets is.)
  • 06-29-2014, 08:43 PM
    adjusterjack
    Re: As a New Executor, I Have Questions About Probate Proceeding
    Quote:

    Quoting kunrj
    View Post
    I now have more forms to fill out and one of them is the W-9 form. This was sent by an investment company that my partner has mutual funds with them. I told them that I want all the funds in his account to be liquidated and send to me. Can someone explain to me what the W-9 form is? The Tax Identification Number to be used on this form is my SSN, right? When I spoke with a representative on the phone, she didn't seem to know much. She even told me that I might not get anything because of the NJ laws. I tried to tell her that at least 50% of the value of the account could be released to me but she didn't know anything about that. I would appreciate if someone can explain what the W-9 form is being used for.

    You were not married.

    If you were not listed as beneficiary the funds would not go to you personally.

    If others were listed as beneficiaries the funds would be divided and sent to those who were listed.

    If there were no beneficiaries listed the funds would go to the account holder or to the estate of the account holder and would have to be deposited in the estate account for distribution to heirs named in the will.

    If you are the only heir named in the will you would eventually get it all when the probate process is over.

    If you were not named in the will then the estate gets divided amongst whoever was named in the will and you would get nothing.

    Any questions?
  • 06-30-2014, 02:42 AM
    kunrj
    Re: As a New Executor, I Have Questions About Probate Proceeding
    Yes, this particular account does not have a beneficiary and at this point, I would like to collect the money and put it in the estate checking account for expenses. I tried to ask for an official report of the value on the date of the death but they said that they wouldn't provide it until they had all the information. However, one person actually told me the value of a share on that date, so informally I know what the value on that date was. I suppose next year I will have to do the final income tax return for my partner and the income tax return for the estate account. Am I right?
  • 06-30-2014, 03:13 AM
    llworking
    Re: As a New Executor, I Have Questions About Probate Proceeding
    Quote:

    Quoting kunrj
    View Post
    Yes, this particular account does not have a beneficiary and at this point, I would like to collect the money and put it in the estate checking account for expenses. I tried to ask for an official report of the value on the date of the death but they said that they wouldn't provide it until they had all the information. However, one person actually told me the value of a share on that date, so informally I know what the value on that date was. I suppose next year I will have to do the final income tax return for my partner and the income tax return for the estate account. Am I right?

    Based on this it is definitely the EIN for the estate that would go on the W-9. Yes, you will need to do a final income tax return for your partner and an income tax return for the estate.
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