Quote:
Originally Posted by MS Fowler
Same commet as for question #1--with the added incentive that none of you guys stand to benefit by any advice, or sales opportunity you create.
At some point, my wife and I stand to come into a decent ( for us) inheritance. I would estimate the cash at about $150K, and a mortgage-free town house with a value of about $225K.
We would entertain the idea of moving to another ( more tax-friendly) state. Does it make more sense to sell both houses, and move, and use whatever cash is needed to buy a new house, or to pay off the current mortgage on out house, and then sell it, and move.
Is one of these a better strategy than the other?
The idea is to get into a new house free of debt, and have some cash to put with existing investments, and SS.
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COUIPLE OF QUESTIONS:
Do the folks from whom you will inherit the property live in MD and is the real property located in MD.
What relationship do you or your wife have with either of the soon to be decedents, if any?
Read this:
Overview of Maryland Inheritance Tax Laws
and this..
http://registers.http://registers.maryland.gov/main/packets/AdministrationBooklet2013final.pdfmaryland.gov/main/packets/infoguide.html
Bad news: Md is the only state besides NJ that has both an inheritance AND an estate tax. Md's estate tax level is currently 1 million, so this is not in play for what you are expecting to inherit. Once inherited, look at your own resulting estate vis a vis the 1 million number.
You may be subject to the inheritance tax, depending on the relationships, if any...
Each beneficiary of a Maryland estate receives an exemption from the inheritance tax based on the beneficiary's degree of relationship to the decedent. Here are the exemptions from the inheritance tax that are currently available under Maryland law:..............
p 19 of this lists what relationship of beneficiaries is exempt. If you don't qualify for exemption, the tax is 10%.
http://registers.http://registers.maryland.gov/main/packets/AdministrationBooklet2013final.pdfmaryland.gov/main/packets/infoguide.html
So, an estate of 375,000 would apparently incur a 37.5 k inheritance tax maximum. You get a basis in the town house of 225k ,its FMV at DOD. Sell it the day after you inherit it and there is no gain and no CG tax.
How much do you love living in your present home? How much built in gain does it have? What do you want to do in retirement & where do you want to live? You & the missus can possibly defer 250k of gain each on the sale of your principal residence if you meet several tests. One scenario could possibly be to sell your home & move into the TownHouse. Live there until you retire & go to Florida (or another state) where there are no longer any state death taxes.
Most states did not change their laws 13 years ago when the federal law changed and today do not have estate or inheritance taxes. You and I happen to live in states that have both. Is it a coincidence they both happen to be broke, traditionally blue states?
I have only given the attached materials a cursory view, so I can't tell if there is any advantage to moving before you come into the inheritance, since you did not mention where the decedents live?. I assume they also live in MD and the RE is in MD too.