Taxes, Capital Gains, Community Property, Basis, and What to File After Someone Dies

After someone dies, taxes and paperwork are probably not the first concern on their loved ones’ minds, but they are unavoidable. It’s important to learn about different types of taxes and what forms you may need to file in the event of a loved one’s death, so that you are prepared when the time comes. In today’s episode, host Liz Smith is joined in conversation with Ryan L. Beason, Certified Public Accountant and Partner at Elgee Rehfeld.

The first important concept to understand is your basis which essentially boils down to what you initially paid for something. Any money you make off that purchase minus the amount you spent initially is your capital gains. This provides an incredible opportunity to gain when someone passes away and their personal residence enters their estate, because the basis is stepped up to the fair market value from the date of their death. In Alaska, people have the unique opportunity to opt into a community rental agreement, and it is typically highly recommended to do so as a way of reducing taxes. There are several different tax forms that need to be filed after a loved one’s death, and Ryan explains the different reasons for filing each one in addition to extra forms for things like certifying someone as the official handler of the estate.

Tune into this week’s episode of What’s Next to learn more about different types of taxes, capital gains, community property agreements, and what forms need to be filed after someone dies.

Overview:

Quotes

• “Anything above your basis, or what we call your purchase price, would be capital gains.” (11:30-11:34 | Ryan)

• “When one spouse passes away, say five years previously, they get what's called a one half basis step up to fair market value. So whatever the fair market value is on that date of the first spouse’s death, half of that basis gets stepped up to the fair market value.” (23:12-23:28 | Ryan)

• “Alaska is one of the unique states where you can elect into a community property agreement. Most states are either community property or not community property. So this is something that we kind of recommend that as people kind of update their wills and estate plans they do go add the community property agreement in place.” (25:07-25:27 | Ryan)

• “The tax brackets are pretty high at low income levels.” (35:23-25:27 | Ryan)

• “Be aware that if you do have a refund coming in that final 1040 and you have to paper file, it's going to be a while before you see that money.” (38:23-38:30 | Ryan)

• “It's not that you have to know all these concepts or how they work, but it's good to know that maybe I need to go talk to somebody at least to kind of point me in the right direction. Because there are potential opportunities that can be missed if you don’t.” (38:59-39:13 | Ryan)

Links:

Elgee Rehfeld Website | https://www.elgeerehfeld.com/

Post-death tax information | http://www.courts.alaska.gov/shc/probate/probate-tax-matters.htm

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