What can you do if you think the Personal Rep is using the wrong death date for determining basis for Real Estate? The mother survived the father and had a life estate.

[rmonger54]

The father solely owned the property. The term 'remainderman' was not mentioned in the will so the Personal Rep attempted to get the court to award the real estate to her and her brother (children of the father), but the will gave the residue of the estate to the mother who also had 3 children. The court decided to award 50% to the 2 children and 50% to the mother's estate. She has been gone for 2 years. There is $100,000+ of capital gains reported on a 1041 for the mother's estate. The house was sold 15 months after her death for $716,000, but she is estimating the basis at his death (Dec 2018). I don't have a clue how this can be filed and it makes no sense to pass this expense down to the beneficiaries of the mother. What can I do?

[M-MTax]

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@rmonger54 wrote:
What can I do?

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Honestly? You need to retain legal counsel if you want to pursue this.

[rmonger54]

When the daughter filed the request for the court to give her and her brother the real estate after the life estate terminated with the step mother's passing. We were forced to retain a probate attorney even though the mother's personal estate was valued at less than $25000 in order to object to this filing.  The hearing was delayed from June 2023 until February 2024 at which time the attorneys argued that the will did not name a remainderman so it was unsure what to do with the real estate.  The real estate was the only thing that was not given directly to the mother. The will stated at her death the residue of the estate would go to her estate.  The attorney's argued that the residue was not the real estate even though it was all that remained of the husband's estate.  The court then ordered that the estate should be sold and the money divided 50% to the brother and sister and 50% to the mother's estate.  The personal daughter used $15,000 of the estate for a group of attorneys for the hearing, she also paid over $4000 to have her step-brother evicted from the property before the hearing even though he had been living there in a 5th wheel for 3.5 years prior to her passing.  In addition to this she paid her primary attorney at least an additional $15,000.  She also did not name the step-mother's children as heirs even though they were named in the will.  The husband and wife's wills were written to compliment each other so the change giving the 50% to the husband's 2 children from a previous marriage an additional 1/5 of the same money from the step-mother's will because the residue was to be divided into equal shares in the mother's will.  This gives the husband's children each 35% of the real estate and each of the wife's children only 10%. The home had a VA home loan for the house prior to marrying his wife.  The house was paid off long after they were married and they lived together in the home for 40 years.  We tried to do everything right, but even retaining an attorney has only cost the estate $16,000 more and we will be lucky to get anything after the daughter is through.  

[M-MTax]

The house was sold 15 months after her death for $716,000, but she is estimating the basis at his death (Dec 2018).

I'm not sure what to tell you here. If she had a life estate, then she acquired the remainder at his passing and owned in severalty. When she passed, the basis would be stepped up to its FMV at her passing. 

The term 'remainderman' was not mentioned in the will...

It doesn't have to be mentioned if she was on the deed. There are some facts missing here, but it appears as if the father was the only person on the deed. 

[rmonger54]

If you can refer to my other post it tells a more full story.  It is true she was not on the deed.  He bought the home on a VA loan a few years prior to their marriage, but they paid it off and lived in it together for 40 years. I don't believe that wills fall under contract law so a missing word should not derail the will if the intent is clear.  I am not an attorney, but every normal ending path in both wills ended with a distribution of the property 5 equal shares, 1 to each child.

[rmonger54]

The will specifically gives her the residue of the estate on her passing.  The attorneys did not believe that the residue was the real estate even though he gave her everything else before the life estate and the real estate is recognized as the only remanence of his estate.  

[rmonger54]

My other post is  "Can a person deceased for over 2 years pay capital gains tax"

 

[M-MTax]

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@rmonger54 wrote:

..I don't believe that wills fall under contract law so a missing word should not derail the will if the intent is clear.

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Correct, a will is not a contract (there is no consideration), but this appears to have already been settled by a court and there likely is not much you can do at this point beyond going to court (again).

[M-MTax]

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@rmonger54 wrote:
"Can a person deceased for over 2 years pay capital gains tax

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Is that a question? Obviously, a decedent cannot pay capital gains tax post-mortem but the estate can.

[M-MTax]

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@rmonger54 wrote:

The attorneys did not believe that the residue was the real estate......

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That might have been in error unless someone else was on title or the owner reserved a life estate (or it could be implied that he did). This could also depend upon state law.

[rmonger54]

I live in Oregon.  There was no one else on the deed. 

[M-MTax]

Understood, but there is honestly nothing you can do at this point other than consult with local legal counsel and this might be an exercise in futility.

[rmonger54]

Both probates are still open.  The PR on the deed holders will (who passed first) reserved $60,000 for taxes, but did not pay the taxes on the 50% that was distributed to the estate of the wife who lived her life estate and passed in March 2023, she instead sent the wife's estate a 1041 indicating the estate would need to file on $100,000+ of capital gain.  I do not know how this is done or why there is any capital gains since it appears to me that the wife's death date should have been used for the basis to determine capital gains and the real estate was sold 15 months after her death - no way and estate held for 40 years and sold that soon after the death date would incur that much capital gain in 15 months.  The house sold for $716,000.   The PR must have used the deed holders death date which was 4.5 years earlier. I am not sure she actually has a tax professional doing this there is no indication of expenses to the estate with regard to a tax professional.  I don't know how to get a direction to help our lawyer do something to clarify this without charging $300+ an hour.

[rmonger54]

What is a local legal counsel?

[M-MTax]

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@rmonger54 wrote:

What is a local legal counsel?

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An attorney in your area.