Ask Liz Weston

Get smart with your money

Inheritance

Q&A: How do you force heirs to pay?

By Leave a Comment

Dear Liz: My husband and his six siblings inherited a large family farm. No one lives there; it is used recreationally. Our limited liability corporation is set up so that only blood relatives can inherit. If they don’t want it, they can sell their share (only to family) for 40% of the value. The seven current owners all pay equally for the upkeep.

Our question is what to do with the next generation if some don’t want to pay their share of the upkeep, and also don’t want to sell. This is a very likely scenario. How to “force” them to pay? About half of the grandchildren (13 of them) will be all in, the other half probably won’t care to pay. My husband and I are the youngest of the owners, and we most likely will need to deal with this someday. If you don’t have a solution, what type of lawyer would be best to consult with?

Answer: It’s impressive and perhaps even astonishing that seven people have been able to successfully share ownership of this property so far. Expecting the next generation to do the same, with nearly twice as many people involved, is almost certainly asking too much.

An experienced estate planning attorney can offer suggestions on how to manage this property and address options if heirs don’t pay their share, either due to unwillingness or inability. (Keep in mind that heirs who are ready to pay their fair share now may not always be able to do so if their economic fortunes change.) Most likely, forcing payment would require the cousins to resort to the courts, so the current owners need to think deeply about what’s most important: keeping this property in the family or preserving family harmony.

Q&A: Friends don’t ask friends for condos

By

Dear Liz: I have a younger friend who has asked me to leave them a condo I own. I would prefer the condo remain in my daughter’s name, and designate that the income from the condo go to my friend after my death. Is there a way to do this?

Answer: Your friend just handed you a massive red flag. Please heed this warning that they may not be trustworthy.

Generally speaking, people shouldn’t be asking for bequests for themselves. That’s especially true when the request is unsolicited — in other words, if you didn’t open the door by requesting what they might want from your estate.

Someone who feels comfortable enough to ask for a handout after your death may have no compunction about helping themselves to your money while you’re still alive. Financial elder abuse is a huge problem, and the perpetrators are often people the victim knows such as friends, family and caregivers.

Please tell your daughter about this request, and consider going together to an estate planning attorney. The attorney can make sure your estate plan is in order and discuss ways you can protect yourself from schemers and fraudsters.

Q&A: When money disappears from a mother’s estate

By

Dear Liz: My mother recently passed and my sister is handling all the legalities. At one point, my sister mentioned our mother had a sizable savings account plus two retirement accounts valued at $400,000, and that I would receive something. Now she is simply saying, “I don’t know where the money has gone.” She handled all my mother’s finances for years before her death. How is this possible? I can’t hire an attorney, nor do I want to alienate my sister or seem greedy. What should I do?

Answer: If your sister handled your mother’s finances for years and she’s settling the estate, then she almost certainly knows where the money went. Why she won’t tell you is the mystery.

Your mother’s money may have been eaten up by long-term care expenses, which can be breathtakingly expensive. That’s especially true if there was a long gap between your sister’s disclosure about the accounts and your mother’s death.

If that were the case, though, your sister could just say so.

There are many other possibilities. Your mother could have been scammed, or gambled away the money, or been the victim of financial elder abuse. Abusers are often people the elders know, including relatives and caregivers.

Perhaps your sister didn’t help herself during your mother’s lifetime, but arranged to be the beneficiary of all the accounts, either with or without your mother’s consent.

You don’t have many options if you aren’t willing or able to consult an attorney, but you wouldn’t be greedy to ask for some clarity from your sister.

Q&A: An aunt left him out of her will. Can his siblings share the windfall?

By

Dear Liz: My brother and I have received a cash inheritance from our aunt, as have our cousins, among a few others. Our youngest brother was excluded, as was our cousins’ youngest sibling. I believe my aunt, who was 96 when she died and in her 80s when her will was done, simply forgot these two as the family was spread out and contact was infrequent. My brother and I want to do the right thing for our younger brother and give him an equal share from our inheritance. I know most states don’t have inheritance taxes, but since he won’t technically be inheriting it I wonder if there are any other tax implications for us or him.

Answer: Whenever gift taxes are owed, which is rarely, they’re paid by the giver.

Dividing your inheritance with your brother would be a gift to him, so he would owe no taxes. You might have to file a gift tax return if the amount you give him is more than $19,000 (the current annual gift tax exclusion amount). But you wouldn’t owe gift taxes until the amount you give away over that annual limit exceeds your lifetime limit, which in 2025 is $13.99 million. The same is true for your other brother — a gift in excess of the $19,000-per-recipient annual exclusion would require filing a tax return, but probably not paying taxes.

Gifts in excess of the annual exclusion also reduce the amount you can pass free of estate taxes after your own death. If you’re a multimillionaire and likely to face these taxes, please consult an estate tax attorney.

Inheriting stocks after a parent’s death resets the cost basis

By

Dear Liz: I am a beneficiary of my father’s brokerage account. Upon his death, the brokerage company closed his account and transferred all of the equities to me in a new account. How will I know the cost basis for capital gains purposes when I sell the stocks?

Answer: You will use the value of the stocks on the day of your father’s death as the new tax basis. This is known as a “step up” in basis, since typically the fair market value at death is higher than the original basis, or what your dad paid for the stocks. Any appreciation that occurred during his lifetime won’t be taxed, but you would be subject to capital gains tax on any appreciation that occurs after that date.

Q&A: He’s held stocks for decades. Should he sell before he dies?

By

Dear Liz: My father-in-law, age 100, has more than $1 million in stocks and bonds purchased in the 1980s and 1990s. With the stock market so high, I have suggested that he might want to sell the investments, take the tax hit and consolidate into short-term certificates of deposit or similar. This would make it easier for his family to manage (in trust) upon his death. Does this make sense or do we leave it alone?

Answer: Selling now means your father-in-law would have to pay a substantial and perhaps unnecessary tax bill on the gains he’s incurred over the years. If he instead leaves those assets to his heirs at his death, most likely no tax would be owed on the gains.

There are some exceptions, such as if the investments are held in retirement accounts or an irrevocable trust. But investments held in revocable trusts, such as living trusts, should qualify for the favorable step-up in basis that would eliminate the taxable capital gain at his death.

Yes, there’s always a risk that the markets could drop — but they would have to drop pretty far to wipe out all his gains, assuming he’s got a reasonably diversified portfolio. A fee-only, fiduciary financial planner could review the portfolio and offer recommendations about any changes that might be needed, while a tax pro could discuss potential strategies for minimizing the tax bill.