From: lovetor2i (Original Message)Sent: 3/1/2004 8:39 AMHi, I have a question about Inheritance rights. Will the money in 401K, bank accounts, Real estate automatically belong to kids if both parents die (God Forbid!) ? Also, is the surviving spouse automatic beneficiary of the above assets? (Assuming in both the above cases, there is no Will.)
From: guruswSent: 1/20/2007 3:10 PMI never found similar threads in the forum, and this one is not answered. I had a few questions myself about Inheritance.
If I am GC holder or USC, what are the tax implications when inherit property (money, real estate, mutual funds) from parents in India?
If I am GC holder or USC, and if I die, who owns my property in the absence of will (say I have surviving wife/kids in USA, and surviving parents in India). Can I have a will that gives property rights to my wife or parents? -----------------------------------------------------------------------------------------------------------------------
The question posed above revolves around if one dies in USA without a will, how are assets distributed and what are tax implications.
Your 401K and IRA have beneficiary designations. There you specify beneficiary and contingent beneficiaries. These overide the will, if there is one. Your beneficiaries will have to file a claim with the 401K and / or IRA custodian and claim the money. The process is this simple. If however the beneficiary is a minor, then a custodian of the minor will be given the authority to manage the 401K and IRA. This custodian must be a surviving parent or in absence of any surviving parent, a court appointed guardian. The court will appoint guardian based on what is stated in a WILL. Since we are discussing a situation where no WILL exists, then in that case, it is upto the court. A court may accept a competent close relative's petition in such a case or appoint some financial institution to manage the financial affairs of the minors.
The Real estate and banks, brokerage accounts in USA do not automatically have beneficiary. If you have joint account (with rights of survivor ship) then the surviving joint account holder gets access and ownership to the accounts without any problems, the same way they had access and ownership before the other hoint account holder's death.
In case where an account owner dies and does not hold joint accounts (with no TOD or POD, which I will discuss a little later below) and there is no WILL, the state law will apply. The state law varies from state to state and in most cases a certain percentage of these assets go to the surviving spouse and the rest to children. In case there are no children, a certain percentage to spouse and a certain percentage to parents in some states and yet in others in such cases all of it to spouse.
If both spouses die and children survive, in such a case again the state law rules and in most all states these go to children. The individual state law needs to be looked at for detail, if one wants to. Of course a guardian would be appointed for children.
Whether there is a WILL or not, upon death a court administered process called Probate has to occur. For simple and small estates, many states have simplified procedures which does not require involving courts. However if there is real estate or substantial assets, the court will get involved in the process of probate.
To make the process easier, here are a few suggestions:
1. For all tax deferred accounts, make sure that you have beneficiaries AND contingent beneficiaries defined.
2. For bank accounts, preferable account option is a joint account with right of survivorship.
3. Whether single or joint bank account, get a form from the bank called POD (Payable on Death) and specify who you want the money to go to upon your death. Specify contingent beneficiaries too. Submit to bank and keep a copy with your important documents. This will bypass WILL, Courts etc, except when the beneficiary is a minor. The bank will not give access to the money to minor and a financial custodian by the courts will have to be appointed.
4. For taxable brokerage accounts, whether joint or single, get hold of a copy of Transfer on Death (TOD) form. This instructs the institution that upon your death they are to transfer the stock and bond ownerships as well as cash to designated beneficiaries. Same caveats as above for minors apply.
5. Real estate goes to the joint account holder if the holding is joint, or ownership is transferred per the WILL if one exists; if not then, the laws of the state rule. Re registration of the house in new ownership names has to be done at the county offices.
Simple Wills for real estate and other small assets and assigning a guardian of your choice for minor children can be accomplished by Nolo Wills or other such sites on internet. Complex wills may require an attorney.
The courts, as a part of probate will want all the debts paid out first. Thi is the responsibility of the administrator which the court will assign in absence of a WILL for a estate that is large enough or one that has to go thru the probate per the state law.
If the estate of a US resident is less than 2 million (this includes life insurance proceeds if the deceesed was the owner of life insurance policy), then there are no estate taxes due. But if the estate is greater, then it is the responsibilty of the administrator to makes usre estate tases are paid before assets are distributed.
Does anyone have a answer on the other question? i.e. If I am GC holder or USC, what are the tax implications when inherit property (money, real estate, mutual funds) from parents in India?
Does anyone have a answer on the other question? i.e. If I am GC holder or USC, what are the tax implications when inherit property (money, real estate, mutual funds) from parents in India?[/quote]
There are no tax implications on the inheritance.
However, once the estate inherited becomes yours, you will be responsible for taxes on any earnings that are subsequently generated from the estate.
If you inherit stock, mutual funds, real estate and when you sell those assets, you will have to report the sale on your tax return. Your cost basis will be the fair market value of assets when they pass over to you. IRS regulations define how the fair market value should be computed for cost basis. The gain or loss calculated off of the stepped up basis (based on FMV on transfer) will be your gain or loss and will have to be reported.
If cash is inherited, there are no tax implications at all in such a case.
RSK;3018 1. Once my mother sells the property, and after paying applicable taxes can she give me the cash as inheritance? They may not have to pay any taxes since they re-constructed the whole house 5 years ago spending 19 lakhs. [/quote]
Your mother can gift you as much as she wants with no US tax or Indian tax consequences. As to calling that money as inheritance, I am not familiar with Indian laws in that respect and perhaps Rajesh Dhruva can opine.
[quote]2. Can I deposit the cash in NRO account as inheritnace?[/quote]
I defer this to others. I am certain you can deposit a check that you receive from your mother in this account, but as to designating this as "inheritance", that part I do not know. Normally the money deposited in NRO account is not repatriable, although there may be exceptions. This is where, perhaps someone else may respond.
[quote] 3. Can I repatriate the same? [/quote]
See answer to # 2 above.
[quote] 4. If I can demonstrate Indian Income tax clearence to IRS, would my tax liability here in US be nullified?? [/quote]
If the money is a gift or inheritance and not income for services or proceeds from a sale of an asset owned directly by you, there are no US income tax consequences. All you will have to show is that someone gave you the money as gift, if and when queried by IRS. So a letter from mother stating that she is gifting you the money, a copy of the check and proof of transfer to USA is all that will be needed to be stored to be produced if IRS ever audits.
[quote]5. If Cash can not be given as inheritnace then the other alternative I have is to formally and legally (what paper work that should be I dont know and resgistering on my name is a waste of money since we are going to sell it anyway) inherit the property [/quote]
Giving the property to you would require settlement deed or gift deed and in both those cases, there is a fair amount of stamp duty and registration expenses involved. That all is unnecessary. Your mother can gift you as much money as she wants. There are no US or Indian tax consequences.
From: R2I_VKK (Original Message) Sent: 6/26/2006 9:30 AM
I was not exactly sure which forum to put this post, but thought this would be a best place.
Me an my spouse are in the process of writing our wills. We have a son who is a minor and one of the things in our Will will be instructions on how to handle my son, in case if we both die.
Here is what we would like to happen: My son be transferred to India to our relatives and a trust be opened in India with an assigned trustee and my son as a beneficiary.
Questions: 1. Is it possible that a trust can be created in India based on our Will created in USA and can it be directly created from USA? Or will it be a better option to get our estate transferred to the assigned relative and he/she establish a trust as per our will (my concern here is what if the money is transferred and no trust is created).
2. I do not know how trusts works in India, but I beleive that it should be a private trust. In that case, will the trust be closed automatically once my son reaches certain age?
From: LLLLWhenR2ISent: 6/26/2006 11:52 AM I have yet to do the same but I was advised to provide custody to some one here and then that person do the transfers. It is very difficult to transfer custody of a kid to a person without SSN. There is lot more paperwork involved in your case such as all the document proof of India trust/relative and that the channel is all legal and not fraud. Makes it lot easier to do here to a person having SSN. To all in this board - I would strictly advise all of you to have your living trust for life is so uncertain. If anything happens to both of you, your kids will be in foster care and the court will appoint guardians to them after court battle, probate etc. I myself is late in getting this done...but better late than never.
You can get your wills done from an estate planning attorney. Creating a will from an attorney can cost around $200.
Some states allow you to prepare your own wills and in some states you do not even need to notarize it. But it is always advisable to get it done from an attorney.
01. I believe a person can dispose of non-human property through a "will" 02. To take care of minor children, a trust or custodial agreement would be required 03. The courts in India would honor a valid legal document created in US
lovetor2i (Original Message)Sent: 3/1/2004 8:39 AMHi,