Inheritance

[newbie2]

The most important aspect of a Chapter 13 plan is that your whole financial house (so to speak) is under the control of the Trustee during the life of your plan.

Report the inheritance to your attorney. The very last thing you want to happen is to have your plan dismissed after paying in to it for 3 years.

[tobee43]

The most important aspect of a Chapter 13 plan is that your whole financial house (so to speak) is under the control of the Trustee during the life of your plan.

Report the inheritance to your attorney. The very last thing you want to happen is to have your plan dismissed after paying in to it for 3 years.

good advise!! i would do it asap...just to be safe.

[LadyInTheRed]

I certainly will not lie, but they really cann't. They can search probate records or asset searches, but my name is not listed there. I guess I'll have to report it on my taxes, but it's not taxable.

Are you certain about that? While the principal inheritance is not taxable as income, if the estate earned income (interest, dividends, etc.) between the date of death and the date of distribution and that income was distributed to you, you (and the IRS) will receive a K-1 from the personal representative of the estate reporting the net income that you must report on your return.

[tobee43]

Are you certain about that? While the principal inheritance is not taxable as income, if the estate earned income (interest, dividends, etc.) between the date of death and the date of distribution and that income was distributed to you, you (and the IRS) will receive a K-1 from the personal representative of the estate reporting the net income that you must report on your return.

paying the tax usually depends on where you live, and your relationship to the deceased....


or depending on whether the pay out was; for example......Life insurance proceeds..... paid to you, are used in the calculation of the gross estate and may be taxable...

if you have not rec'd a k-1 by now...chances are you will not.
also... k-1 1065 are usually for business....Schedule K-1 is used to report a beneficiary's share of income, deductions, credits, and other items from pass-through entities. These generally include limited partnerships, S Corporations, income trusts, and limited liability companies....so one rarely sees them in this type of situation.

federaly taxes you should be fine.....state maybe not depending on what type of estate the monies came from. i have worked with estates that had over 500k and had to pay no FEDERAL taxes...however, they WERE NOT in bankrutpcy.

i have also worked with people who indeed did have to pay on much less amount because the source of the inhert. funds came from property...which was sold and they had to pay taxes on the capital gain...(LOL...they actually inhert. the Capital GAIN!!).


Inheritance Tax Basis

"The first step used to determine any inheritance tax that might be due is to calculate the fair market value of the entire estate. This would include cash, bank accounts, stocks and bonds, real state, insurance, and similar items of value. The total fair market value of all these items is termed the Gross Estate".

i.e. In this example, you are receiving a total of 12 x $10,000 or $120,000, which is $20,000 higher than the lump sum of $100,000. This means that you would need to pay income tax on the $20,000 received in the form of interest income.


really do yourself a favor..... if you are in chapter 13 run this by your attorney.

only because it could come back to bite you...like the trustee could want to reclaim those funds for distribution. (if it was found out somehow).

[$$only4ever]

I was 2 years into my chapter 13 when I received an inheritance of $10k. I contacted my attorney who contacted the trustee. I never heard a word from either my attorney or the trustee. I finished out my 3 years and was discharged and never had to give the money up.

[tobee43]

yes, i'm not really thinking there is anything to worry about here...however, we all have a tendency to worry all the time now!

but ALWAYS better to be safe than sorry!

[$$only4ever]

OP should still run it by his attorney. Attorneys do not like surprises.

[tobee43]

i agree with that....absolutely...it would have been the first thing i would have done!

[LadyInTheRed]

paying the tax usually depends on where you live, and your relationship to the deceased....

To clarrify, my statements about tax apply to Federal tax and CA tax. I don't know a lot about taxes imposed by other states.

or depending on whether the pay out was; for example......Life insurance proceeds..... paid to you, are used in the calculation of the gross estate and may be taxable....

Not sure what you are getting at here, so I won't comment.

if you have not rec'd a k-1 by now...chances are you will not.

The OP received an inheritance 6 months ago. Unless the estate's personal representative filed fiduciary returns early, K-1s, if required, would be sent to beneficiaries next year.

also... k-1 1065 are usually for business....Schedule K-1 is used to report a beneficiary's share of income, deductions, credits, and other items from pass-through entities. These generally include limited partnerships, S Corporations, income trusts, and limited liability companies....so one rarely sees them in this type of situation.

K-1's are also issued by estates. I see them all the time.

federaly taxes you should be fine.....

The OP has not provided sufficient information on which to base that opinion.

i have also worked with people who indeed did have to pay on much less amount because the source of the inhert. funds came from property...which was sold and they had to pay taxes on the capital gain...(LOL...they actually inhert. the Capital GAIN!!).

capital gain/loss incurred on a sale of assets by the estate that must be reported by a beneficiary are reported to the beneficiary on a K-1. In CA, state capital gains taxes are often withheld at the time of sale, so the personal representative has to file a fiduciary return to get a refund of any overpayment.

Inheritance Tax Basis

"The first step used to determine any inheritance tax that might be due is to calculate the fair market value of the entire estate. This would include cash, bank accounts, stocks and bonds, real state, insurance, and similar items of value. The total fair market value of all these items is termed the Gross Estate".


i.e. In this example, you are receiving a total of 12 x $10,000 or $120,000, which is $20,000 higher than the lump sum of $100,000. This means that you would need to pay income tax on the $20,000 received in the form of interest income.

The first paragraph above discusses inheritance tax (basically the same thing as estate tax, but there may be some difference in who is responsible to pay the tax). The example in the second paragraph doesn't seem to be complete. If somebody received $120,000 from an estate and $100,000 represented principal that existed on the date of death and $20,000 was income earned on the principal after death, it is true that that $20,000 would be taxable income.

really do yourself a favor..... if you are in chapter 13 run this by your attorney..

only because it could come back to bite you...like the trustee could want to reclaim those funds for distribution. (if it was found out somehow).

Absolutley. And if you have questions about income tax on your inheritance or estate/inheritance tax, talk to a CPA or estate planning/admin attorney.

[tobee43]

[

QUOTE=LadyInTheRed;441537]To clarrify, my statements about tax apply to Federal tax and CA tax. I don't know a lot about taxes imposed by other states.

it varies from state to state...i have worked with estates from calif. while the clients i worked were residence of other states. taxes were not removed but were left up to the person who rec'd money's. california did not withhold. why...i have not a clue.

Not sure what you are getting at here, so I won't comment.

there are different sources of where the assets or monies that are inherited come from...and each is handled in a different mannor. such as the example of the life insurance monies distribution and how it works. tax wise.

The OP received an inheritance 6 months ago. Unless the estate's personal representative filed fiduciary returns early, K-1s, if required, would be sent to beneficiaries next year.

i missed that ,but see it now...i see that the OP is 2 years into the chapter 13 however, once again depending on the source of the income he or she will most likely not find a k-1 applicable if the amount is within the tax exempt guidelines.

once again we are not getting all the information and a tax attorney would most likely know best for this individual. i would be more worried about reporting this directly to the trustee's office and the OP attorney then any tax ramifications...

K-1's are also issued by estates. I see them all the time.

once again depending on the source of where the monies come from in the estate and of the state where the person is paying tax. (being born and raised in calif. i know they tax everything!)...not so in many other states. i have only worked with 2 clients NOT from calif...but inherited FROM calif. they had to pay NO state taxes or federal due to the fact that each of those estates were both under 650k...(at that time...i'm certain the federal limits have changed by now). also, because a k-1 is issued it does not necessarily mean it is used when that person is doing their taxes.


your client base may fall into those categories which i have listed prior. also, i'm certain you are aware that there are maximum limits exempt for many states as well as on the federal level. (most of our clients did not fall into that area taxwise).

The OP has not provided sufficient information on which to base that opinion

.


correct...however, i would think it would be under the federal limits of taxation. but the amount was never mentioned. ( one would think if it was over the limit he or she would be counting their money and not hanging out here!) LOL!!!

capital gain/loss incurred on a sale of assets by the estate that must be reported by a beneficiary are reported to the beneficiary on a K-1. In CA, state capital gains taxes are often withheld at the time of sale, so the personal representative has to file a fiduciary return to get a refund of any overpayment.

this is somewhat interesting, and the basis of your answer may be correct, however, i'm going to disagree with you here. only because i handled this case from calif. the taxes were NOT held (it was quite large)...however, the reciprocate was responsible to pay at tax time....the firm i worked for stepped back. even more, interesting, the executor of the estate was a california based firm, they never held the tax because the property was still intact at the time of distribution. after the estate was released and the distributions done, the property was sold by the executor of the estate (a lawyer in the law firm...interesting?)...no taxes were held on the capital gain of that property. (it was hefty) however, the property WAS NOT sold until after the probate court released the estate.

The first paragraph above discusses inheritance tax (basically the same thing as estate tax, but there may be some difference in who is responsible to pay the tax). The example in the second paragraph doesn't seem to be complete. If somebody received $120,000 from an estate and $100,000 represented principal that existed on the date of death and $20,000 was income earned on the principal after death, it is true that that $20,000 would be taxable income.

it is complete...based on the 120k. just an example of what would have been considered taxable income. there is more to that story....as well. if the person rec'ing the 20k had no or little income for that year, then they would be tax exempt anyway. the amount of tax is added into their gross income and taxed accordingly.

Absolutley. And if you have questions about income tax on your inheritance or estate/inheritance tax, talk to a CPA or estate planning/admin attorney.

[/QUOTE]

absolutely a MUST ....Lady...i do appreciate the dialogue and exhange...it helps prevent "brain fog".

[walkthaplank]

If there were an inheritance or life insurance payout, how would the trustee find out?

We've read the "run it by your attorney" posts, but in a practical sense how would the trustee find out about a payout of this sort, especially if it were under some sort of IRS threshold?

[systemslt]

you spent the money.


if they find out your in trouble. if you tell them your in trouble.


taking few more days to think about what to do wont make a difference.

[espo1357]

To be safe, you should report it.

But, if I got one...well...there are options. I hope I don't get it while in the 13, but there are options....

Options are good, very good...then again "its hip to be square", right?

[shadowb]

I am just curious. My ex who is a snake in the grass was just awarded a portion of an insurance reimbursement refund to the tune of $3000. I was on the 13 with him. He had an affair and abandoned me and a few months later didn't waste any time to hire another BK attorney and had me kicked off the plan with him. Because I was a stay at home mom, working part-time I didn't financially qualify to stay in so was forced out into a 7. He had filed for the divorce immediately on the date of abandonment (actually a few days prior) and blindsided me. I know that is irrelevant, but the bottom line was he was granted a portion of reimbursement that I was receiving from the insurance company. A friend of mine who came out of a 7 told me that she thought that someone in a 13 couldn't receive funds like that and had to report them to the trustee. My ex probably won't report it. Is there a way that the trustee will find out about it if he doesn't report it?

[justbroke]

Not that I can add to what's been said, but there is too much noise. In any event, the poster should report to their attorney. In your particular State, death benefits may be exempt, and this is why it "may" not matter that you received an inheritance. Always consult your attorney when anything happens with your finances over the life of your Chapter 13 plan.

There's nothing else to say or speculate about.