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Ask Dave

A Mess of an Estate Deal

Doug needs Dave's help figuring out the best way to approach the will situation of his grandfather.

QUESTION: Doug in New York says he inherited money from his grandfather. He will receive 25%, while his mother gets 50%. His mother wants her money up-front, but Doug says she doesn't handle money wisely. Dave suggests he follow his father's will exactly.

Dave's ANSWER: If the will says that, you need to abide by the will. You're the executor of the will. But you say he left all the money in your name, and that's a bad idea. If he paid $15,000 for his house in the 1940s and you sold it for $117,000, you have capital gains tax on the difference in those two numbers. You have a bill on that $100,000 because of how this deal was done.

When he gifted the house to you, you got his basis, which is what he paid for it. Then when you sell the house, you have capital gains on everything over your basis, and you got his basis when he gifted it. It's as if you paid $15,000 for the house and sold it for $117,000. That's why it was a bad idea to put this stuff in your name before you did this.

The portion that is in your name is going to be taxed. You need to see your tax person because you have a mess. But that is a side issue.

Back to your mom, he left a will that had nothing in it because everything had been transferred to your name. We know that half of a house was in it. You say the bank accounts are in his name and your name. The portion that is in your name is your money to do with as you please, legally speaking. It's not bound by the will.

Morally, you're going to follow through and give it to the people that the will says. But legally speaking, you owe 100% of that.

As far as the other stuff, you are obligated to act as the will says. You don't have an option because you're the executor of the state. That means you have to execute what the will says. If you don't, you could be liable for legal action by someone in your family, or your mom later if she blows it all and comes back and says that you didn't dole it out like grandpa said to. She could sue you later.

So you need to go by the will and do what the will says. And you need to talk to your estate attorney and he or she will verify what I just said.