My share of an inheritance from my mom will be $135,000. Her financial advisor says that if paid to me in a lump sum, about $50-55,000 will be taxable as ordinary income.
I took a 2nd mortgage last year on my house to buy a vacation home that needs some work in order to be usable for myself and as a seasonal rental. I owe $95,000 on the 6.5% loan; repairs and upgrades will run about $35,000. Getting this house in order is a top priority. I hope to retire next year, and planned to sell the main house, using the profit to pay off the vacation house loan and pay cash for a retirement place. I would continue to own two houses.
Question: What is the best strategy to use this inheritance? Take the tax hit and pay off the vacation house loan and repairs? Keep the loan, pay for the repairs, invest the rest, and pay off the loan next year with the sale of the main house? Other, better ideas?
2006-08-17 04:46:08 · 4 answers · asked by dognhorsemom 7 in Business & Finance ➔ Personal Finance
I think you should first of all consult a tax specialist. Get a 2nd opinion of a pro with whom you share all the details. I am skeptical about the story that if you inherit 135K from your mom that you have to pay that much tax.
But you also did not say what kind of investment the money was in. Is that a savings account? Equities? 401K or IRA or Roth IRA, Life insurance, Annuity money etc?
Please collect a second opinion form a good tax accountant or check out whether Suze Orman on her website has some good suggestions. I am sure there is a better solution for you than paying that much tax.
Overall I would look for legal possibilities to avoid paying this tax amount, it sounds way high and crazy (especially for an inheritance).
Sounds like a big waste of money to me. But also I would be careful of what your financial advisor says, he may just be very interested in selling you certain investments.
2006-08-17 05:06:38 · answer #1 · answered by spaceskating_girl 3 · 2⤊ 0⤋
Go see a Certified Financial Planner. They are more qualified to assess your personal financial situation than a Financial Advisor and they have tons of ideas to help with your taxes. The CFP has gone through much more schooling and is held to higher standards than the financial advisor, who often has no real credentials. Good luck!
2006-08-17 05:12:05 · answer #2 · answered by jazzzame 4 · 0⤊ 0⤋
It is my understanding from reading "Andersons Probate" that when your mom passes you can get $100,000 from the estate with out that getting taxed. Anything over that gets taxed at an increasing rate dependent upon the amount. So if you got $100,001 the estate would pay the tax on the one dollar that is overr the hundred k.
2006-08-17 04:54:45 · answer #3 · answered by splat 2 · 0⤊ 0⤋
CAN YOU TAKE THE INHERITANCE OVER A PERIOD OF TIME AND DONT YOU HAVE TO PAY THE TAX AT THE TIME OF THE INHERITANCE WHETHER YOU USE IT OR NOT?
2006-08-17 05:02:03 · answer #4 · answered by BAG LADY 4 · 0⤊ 0⤋