I'm currently working with my father to redo his well (recently diagnosed with terminal brain cancer). His total estate will be worth around 2-2.2 million dollars. I live in VA, and he lives in MD. He currently owns his own company, and the building it operates out of. He is leaving me the building. It is currently an LLC. He has talked about starting to gift it now, but the financial advisor advised possibly against that because it will incur a transfer tax to start doing that. He suggested that the best method might be to just let me inherit it straight up. The building is worth around 1.2-1.3 million. It is the only thing I am inheriting for right now, although he is working on selling 2 properties, in which case I would also have some cash to inherit in the trust as well(maybe 200,000). Just looking on some advice on leaving it as an LLC and gifting it vs just letting me inherit it. The MD inherit tax is 1.5 million max, which he will obviously be over. Thanks for your help.
Mon Apr 06, 2015 7:49 pm
oldguy Senior Member
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quote: 2-2.2 million
I googled it, it appears that MA is one of two states that has both inheritance tax & estate tax. But the inheritance tax doesn't apply to direct lineage relatives - so you are in the clear with that one.
I didn't find the tax schedule but the max is 16%. And if the amount is $2.2M, he could owe up to 16% of $0.7M, ie $112,000. However, MA also has the usual "look-back" rule, if you gift property to avoid taxes, usually within the last 5 yrs of life, the tax will be owed anyway.
In general, inherited property receives a new bases at the time of death. And gifted property is based on the value when gifted. So, in most cases, you want to wait for the inheritance.
But ask a MA estate lawyer before you decide.
Mon Apr 06, 2015 10:50 pm
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As far as the federal government is concerned the LLC does not even exist so it truly does not matter what you do at that level. Your state(s) might be different however.
Since the total estate is below the federal estate tax exemption of over $5000000, there should be not estate taxes at the federal level either.