Financial Resource

Collecting Estate Assets

You brought in the bank statements and the bank books. The stock certificates were removed from the safe deposit vault. There were two people who owed your father money, and your lawyer wrote to them. One debt was past due and the other still had a few months to run before payment was required to be made. However, the debtor was an old friend of your father and there was no question about his ability to pay.

Learn More About Life Estate Planning Today!

All of the bills for the household were brought together, and you made arrangements to pay them. Your lawyer had obtained the stock market reports showing the high and low price of each stock on the date of your father’s death, and he explained to you that the stock would be valued halfway between the high and the low of the date of death. After estimating the value of your parents’ home, the law yer told you that there would be no federal tax. This rather surprised you, since the total estate, including the value of the home, amounted to ,000.

Your lawyer explained that there would be no federal tax, because your father’s estate was entitled to the “marital deduction,” and that one-half of the estate was exempt from tax as long as it was left to your mother (either outright or in trust to your mother with the power to “appoint” the remainder of the trust after her death). Since your mother received everything, one-half of the estate was excluded from computation of federal taxes and since the other half did not exceed ,000 (,000 -,000 = ,000) there was no federal tax imposed.

(1) Federal Taxes: Before you and your lawyer, and possi bly your accountant, can compute the taxes, you must know all of the assets of the estate, all of the debts, and the approximate costs of administration. The federal estate tax provides for a ,000 exemption. However, as we have seen, if at least half of the estate passes to a surviving spouse, either outright or in trust for life with an absolute and unrestricted power to name the remaindermen who take or receive at the end of the life estate, that one-half will be excluded as a marital deduction in the computation of the taxes. The balance, which does not pass to the surviving spouse, has the ,000 exemption and the tax is imposed only on that part of the estate which exceeds ,000. The federal tax must be paid within fifteen months of death and the federal estate tax return must be filed in that period.

(2) State Taxes: Most state taxes provide for some bonus or allowance or small deduction for prompt payment. Under such circumstances, your lawyer will probably tell you to make a payment hi advance, and then, after the estate tax has been computed, either to apply for a refund or to pay the balance. Usually your lawyer will try to overpay the tax by a small amount, thus protecting you against any penalty.

Tags: accountant, allowance, amount, approximate costs, assets, balance, bank, bank books, bank statements, Collecting, death, debtor, debts, deposit, estate, estate assets, everything, Federal, federal estate tax, federal tax, federal taxes, half, household, lawyer, Learn, Life, life estate, marital deduction, market, old friend, penalty, period, possi, power, price, remainder, safe deposit, spouse, stock, stock certificates, stock market reports, value, vault