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Inheritance Taxes - Will You Pay If You Inherit a House? (Inheritance Taxes Explained 2018) - YouTube
Channel: Toby Mathis Esq. | Tax & Asset Protection
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(upbeat music)
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- [Man] Alright my parents home
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is worth one million
dollars in California.
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When they pass, what taxes will I pay?
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Will the cost basis go to
market value after death?
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Now this was written
up slightly different,
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it was kind of like "hey
my parents are old."
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But I rewrote it so it wasn't like...
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(mumbling)
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Right, it was like I could tell
it was from one of the kids.
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Alright.
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Alright, so heres how it works,
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capital, you guys know the
answer to this now right?
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What happens to the
basis of a capital asset
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when a spouse passes,
or when somebody passes?
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It steps up, in California its
a community property state,
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so it steps up to fair market value
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the date the first spouse passes.
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Second spouse passes it steps up
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the remaining portion
of the fair market value
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at the time of death, on date of death.
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So what taxes will I pay?
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Well you're not going
to have to pay anything
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on the inheritance,
you're not going to have
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to pay anything on the actual step up,
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and if you sell it you
wouldn't pay any tax
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other than the transfer taxes.
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The cost basis goes to fair market value.
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So it's like a pretty big win,
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when that stuff happens.
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Now where it's not such a big
win is when somebody passes
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and then the value of
the property decreases
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before you can sell it.
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Then your still, the IRS
uses the date of death.
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This is not relevant
right now for most of us,
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because the federal estate tax exclusion
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is 11.2 million dollars,
for spouses 22.4 million.
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If you're over that,
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then we have to be cognizant
of the value of that asset,
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'cause that's still
included to the estate tax.
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Also there's about four states
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that charge an inheritance tax,
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and if you happen to be in a state
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that has an inheritance tax,
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then if you receive an asset like that,
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it's the value of the asset,
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not it's cost basis or anything else,
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that is taxable.
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So it can be kind of, it can
be a little bit interesting.
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And then if somebody says in California,
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"If I kept in the family, does
the prop 13 basis change?"
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Know off the top of your
head off of that one?
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- [Man] I don't know
about the prop 13 basis.
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- [Man] Eric says sibling or child...
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- I think you're right.
- Has passed.
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- [Man] Yeah so then they
don't have to pay it.
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And then somebody says "what states?"
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What states as far as
the federal estate tax,
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is in all states, the state
estate tax is in I think 14.
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And then there are a few,
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yes somebody says they cannot
hear background responses.
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Background for that one,
Prop 13 parent to kids.
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Usually its lineal, that runs
in a perpendicular fashion,
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so it's going down, downward trend.
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So it's parents to kids,
kids to kids, kids to kids.
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You start skipping out or your
going brothers and sisters
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you're going to have taxes.
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The states that have inheritance tax,
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just off the top of my head I don't know,
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I know New Jersey, cause
I was just looking at it,
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and in Jersey, again if you go lineal,
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you're not going to have
the inheritance tax.
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If you go horizontal, you're
going to have inheritance tax.
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So if you leave it to your
brothers and things like that,
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there's a good chance
they're going to be hit,
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and it's like,
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I think it's 15% or thereabouts,
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it's not a small amount.
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And that's the recipient pays it,
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and just about everywhere
else nobody pays it.
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I'd have to pull up and take a look
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and see which states would
have the other, alright.
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Next one, let's jump through another one.
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(relaxing music)
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