[WSBAPT] Estate Tax Question

[Doehne, Jen]

Hi Inge,
It’s important to differentiate the different types of taxes: income for the estate, real estate excise for the sale/transfer of real property, and excise for the estate.

-->If the PR is transferring the property to a beneficiary (no sale), there would be no real estate excise transfer tax.

-->If the PR is transferring the property to a beneficiary (no sale), if there is an income tax return required to be filed (1041), it would be because other assets earned over $600 in the calendar or fiscal year after death…but the transfer of the property would not lead to this decision.

-->If the total estate of the decedent consisted of over $2,193,000 in assets, there would be a Washington Estate (excise) Tax return filing required.  When calculating the total value of the estate, you would use the date of death value of assets and yes, this value would include the value of the house.

The three taxes above would apply regardless of whether there was a probate opened or not -think of probate as asking the court’s permission to transfer the assets. The only impact on a probate is to consider if any taxes are required to be filed, the probate will likely need to stay open for the conclusion of those filing (perhaps even the receipt of the satisfaction from the Department of Revenue if an estate tax (excise) return is required).  Your Declaration of Completion of Probate would reference that there are no estate taxes outstanding as of the date of closing probate.

The EIN would be required if 1. The real property is sold and the proceeds must be distributed into an estate bank account (the bank account would require the EIN to be opened) OR 2. The estate earned over $600 in income and form 1041 is required to be filed.  The Washington estate (excise) tax return does not require an EIN to be filed.

Regarding the mortgage – was the transfer of real property a specific bequest to your client?  If so, your client must take the property along with all attachments. Therefore it was her responsibility to either assume or pay the mortgage anyway. (You mention that “the property is in her name now”.) If the bequest was part of the residue, that makes it a bit tougher because it sounds like there are no other assets to be reimbursed from. If she was the sole beneficiary, my answer is the same. If there were other beneficiaries, how did your client end up with 100% of the property?  If she is jointly owning the property with other beneficiaries, I would argue that the other owners should reimburse her to their proportion of ownership.  Have they stated they will not do so?

I am not sure where the EIN comes into the conversation here….but it would depend on your answers above.

Should you need to apply for an EIN, personally, I would choose the last of the two to die and apply for only one. However, it has been awhile since I have administered a joint estate, someone else may have to advise on this question.

Best,
Jen


Jen Doehne, Attorney
Pronouns she/her/hers
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909 A Street, Suite 600 | Tacoma, WA 98402
phone 253.572.4500 | fax 253.272.5732 | www.eisenhowerlaw.com<http://www.eisenhowerlaw.com/>
From: wsbapt-bounces at lists.wsbarppt.com <wsbapt-bounces at lists.wsbarppt.com> On Behalf Of Inge Fordham
Sent: Friday, May 5, 2023 1:54 PM
To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com>
Subject: [WSBAPT] Estate Tax Question

Estate tax gurus,

I have a client who opened probate for the sole purpose of executing a PR deed to transfer real property.  The estate has no other assets.  She has not obtained an EIN or opened an estate bank account.  Does she need to file an estate tax return?

Second question – My client paid off the mortgage with her personal funds.  The mortgage company will not issue a check refunding the balance of the escrow account to my client, personally (even though the property is in her name now).  We can ask the mortgage company to issue the check to the estate.  This is a joint estate (for Grandma and Grandpa).  Would I just obtain an EIN for the last grandparent to pass?  (The IRS won’t allow me to input information for two decedents, even though their estates are being probated as a joint estate).  I’m concerned the mortgage company will want to write a check to “Estates of Grandpa and Grandma.”  Do banks object to opening an estate account in joint probate scenarios (with names of two decedents)?

Thanks in advance!

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Inge A. Fordham | Attorney
Fordham Law, PLLC
3218 Sixth Avenue | Tacoma, WA 98406
Office: (253) 348-2657 | Mobile: (206) 778-3131
www.fordhamlegal.com<http://www.fordhamlegal.com>


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