Lost a loved one and facing tax questions? Here’s everything you should know.

Ralph
00:00:00

Have you recently lost a loved one? Are you not only grieving but also overwhelmed by the daunting task of navigating their tax affairs? You're not alone in this. Losing someone you love is one of the hardest things anyone can go through. And when you're in the midst of that deep sorrow, dealing with taxes can feel like an insurmountable challenge.

But today, we're here to help. We'll guide you step by step through the process from filing tax returns to dealing with inheritance taxes and so much more. Let's work together as we navigate these waters so that you can focus on healing and remember your loved one without the stress of financial burdens.

Podcast Announcer
00:00:37

In a world where crushing debt keeps you trapped, where living paycheck to paycheck has become your new normal, and where the dream of retirement seems impossibly out of reach, there's hope. Join financial evangelist Ralph Estep Jr. A man who's walked through the fire of financial failure and emerged stronger on the other side.

Welcome to Ask Ralph, the show where real world experience meets biblical truth to break the bondage of financial despair.

Get ready to take control of your money, break free from the financial stress and align your resources with God's purpose for your life. This is Ask Ralph with Ralph Estep Jr.

Ralph
00:01:16

Well hello everyone, and welcome to another episode of the Ask Ralph show. I am your financial evangelist, and I am truly grateful you've joined me today. Thank you for tuning in and taking the time to be with us. Now, if you missed yesterday's show, we talked about the important topic of changing jobs and how to handle your 401k without derailing your financial future.

So if you missed it, be sure to check it out for some very valuable and very good insights.
If you missed yesterday's show, we talked about the important topic of changing jobs and how to handle your 401k without derailing your financial future. So if you missed it, be sure to check it out for some valuable insights.

And if you're new to the show, I wanna encourage you to explore our previous episodes. We've covered a wide range of financial and faith related topics that can help you along your journey to financial freedom and spiritual growth. And you'll find all of our episodes at askralph.com.

Well, let's get right to our listener question today. And this listener question comes to us from Gretchen. This is what Gretchen wrote. She said,

"Dear Ralph, I recently lost my husband of 30 years. I'm heartbroken and I'm still trying to process this immense loss. On the top of the emotional turmoil, I'm now faced with a mountain of tax related issues that I have no clue how to handle.
I've never dealt with any of this before, and I am completely overwhelmed. Can you please help me understand what I need to do? I feel like I'm drowning in paperwork and grief, and I just don't know where to start."

Well Gretchen, let me say this first. I am very sorry to hear about the loss of your husband.

I want you to know that my heart goes out to you because losing a spouse is an unimaginable pain, and having to deal now with the financial and the tax implications can feel like a truly insurmountable tasks. You know, I remember when my own mother passed away, that was back in, that's almost been two years now, in 2023.

I felt that same gut wrenching pain. And then on top of that, I had to navigate all the financial and tax issues and it was overwhelming. So I feel you today, Gretchen, but here's the truth. With God's help and the right guidance, I was able to make it through and Gretchen, I'm going to help you do the same.

I've been working with clients for over 30 years in this particular area. One of the things they say are certainties are death and taxes. Well, in this particular case, both of those are converging at the same time. So I understand the complexities you're facing and I've got the tools and experience to help you through this difficult time.

Gretchen, I also want you to know it's okay to feel overwhelmed because the truth of the matter is grief is a journey and it's normal to feel like you're drowning in a sea of emotions and responsibilities because you are. You have a ton of emotions. You spent 30 years with your husband. You think about all the good times and all those great times that went along with that.

And I can see where you're worried about the responsibilities now, but here's my big key takeaway right now, Gretchen, remember this. God is with you. He is truly your anchor in the storm. So today Gretchen, I'm going to break down the tax issues in this simple, manageable steps. And together, we'll create a plan that will help you navigate these waters and find true peace of mind.

Now I want to remind you, you can also submit a question. If you've got a question like Gretchen today, you can just go to justaskralph.com. Whether you're facing a financial challenge or maybe you're seeking guidance on a faith related topic, we're here to help you. Again ,that's at justaskralph.com. And don't forget, every Tuesday, I go live right on Facebook. I go live on YouTube. I go live on Rumble. I go live on LinkedIn, but you don't have to worry about any of those things. All you've got to do is go to askralphpodcast.com/live at 1 PM Eastern time. And there you'll be in our community.
You can ask questions, you can, you know, ask people in the community how they handle particular topics. So I'm going to encourage you to check that out.

You know Gretchen, today's topic deeply connects with biblical principles because it's in these times of grief and loss that the Bible offers us such comfort and guidance.
And I love this verse of the Bible when I was going through losing my mom and we were planning the funeral and all that, this one really gave me a great deal of strength. And it comes to us from the book of Matthew and it's Matthew chapter 5, verse 4. And it says this.

"Blessed are those who mourn, for they will be comforted." And if you think about it, Gretchen, I don't have a lot of great comforting words for you. There's nothing I can say today that's going to fill in that pit of grief that you're feeling, but the Lord does. And this verse reminds us that God is with us in our sorrow.

And He offers that constant hope and that constant comfort. And even in the midst of our grief, we can find solace in His presence. And I am grateful for God's promise of comfort during these difficult times. It reminds us that even when we're facing challenges like financial matters, and a lot of people don't think about the connection here, but even when we're facing those difficult financial matters, He's near us.

He's offering us peace and He's offering us guidance. So let's hold on to that promise as we navigate these waters together.

I don't know about you Gretchen, but I am grateful for God's promise of comfort during difficult times. It reminds us that even when we face challenges, He is near, He's offering peace and He's offering guidance. I know this is something that He just gives us. He just seems like he's there for us when we need Him. So let's get to our main topic today.

You know, Gretchen navigating tax matters after the loss of a loved one can feel like trying to solve a complex puzzle while wearing a blindfold.

Somebody said that to me one time and I said, you know, that is a great way to look at that. You're trying to solve this complex puzzle, but you can't even see the pieces because you're blindfolded. But here's my promise to you today, Gretchen and everyone else listening. But with the right tools, with the right understanding and support, you can take that blindfold off and I can help you bring clarity to this situation.

So Gretchen, I've got the tools for you today. So Gretchen, when you're dealing with the emotional turmoil of losing a loved one, and on top of that, you have to handle their financial affairs, it's overwhelming, isn't it? That's what you're feeling. You might be wondering where to start, what forms to file and how to deal with inheritance taxes, something you've never handled.

And these are real pain points that many people face. But as I've said, remember, you're not alone in this. So I'm going to guide you through this process together, but let me start by telling you a story. So I really think this brings home what you're going through right now Gretchen. A few years ago, a friend of mine lost her mother, and she was left with a mountain of paperwork and a head full of questions.

She had that blindfold on trying to put that puzzle together. She felt lost. She felt overwhelmed. But what she did, and one of the things that I work with clients every day on is she decided to take things one step at a time. First thing she did, she sought professional help. I think that is crucial. And we'll talk about that in a few minutes.
She read up on the necessary forms and slowly, but surely, she managed to get everything in order. And Gretchen, I'm going to tell you, it wasn't easy. But she did it. And Gretchen, I'm going to tell you right now, you can do it too. So Gretchen, here is my step by step plan just for you.

First thing. You got to think about the tax return. So there's going to be a final individual income tax return. The Internal Revenue Service requires filing a final individual tax return for your husband. Now, because you're married, you're probably going to file a joint tax return, but this tax return is going to cover the period from the beginning of the tax year to the date of his passing.

So Gretchen, in order to do this, you're going to gather all your typical income information for that period, such as the W-2 forms. Maybe you get in retirement, 1099 forms, and any other income statements. And it occurs to me right now, maybe your husband always handled that. So that's where you're going to start.

Get all the documents together. Maybe you look at last year's tax return. Reach out if you've got somebody that has done tax returns for you in the past, if you've done them yourself or your husband did himself, reach out to somebody like me. You can schedule a call with me later. I'll talk about that in the show, but that's where you're going to start. Assemble all that information because you're going to have to file that tax return for that part of the year.

Now, because you're married, you're probably going to file a joint tax return. And that's going to be on the typical 1040 tax deadline. Nothing changes with the passing of your husband as it relates to the tax return. Now, I'm assuming that you and your husband have filed tax returns in years past, but if someone is listening right now and it wasn't a husband relationship, let's say it was a brother or a mother or father, if they haven't filed tax returns for previous years, you might want to get those tax returns filed as well, because here's the deal. Filing these returns ensures that all the income earned by the person who passed away is reported and the applicable deductions and credits are claimed.

Because if you don't, the IRS is going to get those 1099s or those W2s or that social security statement. And they're going to prepare a tax return based on that information. And that might not take into consideration. The credits or the deductions that they were entitled to. So step one, Gretchen, do the tax return for you and your husband, get all your stuff in order.

And I'm going to encourage you reach out to somebody who's a professional that can help you with that. Second thing, a lot of times people don't think about this one. There could be a need for an estate income tax return. What am I talking about there Gretchen. If the estate, once your husband passes away, if that estate generates income after your husband's death, such as interest or dividends, or maybe there's rental income, you may need to file an estate tax return.

Now, my suspicion is if it's a typical situation, when your husband passed away, you basically became the owner of all of those things. So with a particular, you know, a typical marital relationship and a state tax return isn't very common. Now there could be other reasons for it. I'm not going to get into that today, but let's say you're doing, you're handling the affairs of somebody else.

Well, on the moment they pass away, they move from that being their personal tax return to an estate tax return. Basically all of their assets get poured into this estate and then that estate could have income. That estate could have interest income. It could have dividends. There could be stock sales.

Maybe the estate owns a rental property. So now you've got a separate tax return. So if you're thinking about this big picture for a particular person, Gretchen, this might not affect you because husband and wife relationship is going to be a little different, but you're going to have that 1040, that normal personal income tax return.

And then if an estate is established and there's assets in the estate, there may very well be an estate tax return. Now that's actually filed on a form 1041 and you have to file the one of those if the estate income is greater than $600, and that's another one. Just like the 1040, you're gonna assemble all the income, you're gonna assemble all the deductions related to that, and you wanna make sure this is done.

Now, a lot of times there won't even be an estate and your particular case, Gretchen, I doubt there's an estate 'cause everything probably went from you, or excuse me, from your husband to you. So there's no estate created, but just be wise on that. So let's get into the next discussion, which is estate tax.

So this is where we start talking about this estate tax. Now, the federal government imposes an estate tax on transfer of property when somebody passes away. But I gotta be honest with you. Most people don't fall into this because the estate, the floor, if you will, the exclusion, is over $12 million and most people that I know and most people that you know probably Gretchen don't have more than $12 million.

So for the most part, I'm going to make a very general statement here as it stands right now, current tax law, most estates don't require filing an estate tax return because the exemption is so high. Now I'm not talking about income that was earned in the estate, like interest and dividends. I want to be very clear about that.

There's the operational side of the estate. This is just an estate tax for all those assets that are transferred to somebody else. So like I said, in 2023, that exemption is 12.92 million and in 2024, it's up to 13.6 million. Now if you've got an estate that's greater than that, I'm going to advise you right now, talk to a tax advisor, talk to an attorney to ensure that you're complying with those estate tax laws, because that exemption can help you determine if you need to file an estate return and plan accordingly.

But Gretchen, in your particular case, I don't think unless, you know, you didn't say this, but I'm assuming that all the assets are going to pass to you. So there wouldn't be a need for an estate, but if somebody is listening, they're handling someone else's taxes or someone else's final affairs, if their assets are greater than that $13.6 million, you're going to have to file an estate tax return. So let's move right into the next topic. And that's inheritance taxes. There is no federal inheritance tax. There's an estate tax, but there's no federal inheritance tax. But here's a deal you need to understand. Some states do impose a tax on inherited assets.

And this depends on the state, depends on factors such as the value of it at the time of their passing, the relationship between the parties and who the beneficiaries are. So if you live in a state where there is an inheritance tax, like as an example, to the north of me here is the state of Pennsylvania. They've got some exclusions as well, but a lot more people are impacted by that state inheritance tax. So you've got to check your state's tax laws and determine if you need to file an inheritance tax return. Again, it's a great time to talk to a tax advisor. And if you catch a trend here, almost everything I've talked about here is talk to a tax advisor.

I have to be totally honest with you. This is one of those areas of law. It's not for the do it yourself person. Reach out to somebody, reach out to me. I can help guide you through this process or reach out someone in your community that you trust because you don't want to miss these. You don't want to have that estate or that inheritance tax to get missed because that could cause you a problem down the road.

And being aware of state inheritance taxes can help you plan for any potential tax liabilities and ensure compliance with tax with state tax laws. Now, one of the planning tips here little pro tip here. If you live in one of the states that has an inheritance tax, this is a great thing to talk about when you're putting your estate plan together with your attorney, how to mitigate that, how to work around that.

So that is really the first four things. Like I said, you're going to file that personal income tax return for that period from January 1 till the passing, then you could have an estate tax return. Again, the definite you're going to have the 1040, assuming they had income. The second piece is at 1041.

That's that estate tax return. If there was any assets that remained in the estate, if the assets were pushed off to the beneficiaries right away, the estate doesn't have any income. So that's the thing we talked about the estate tax. Again, the value of that estate has to be over what we call it $13.6 million dollars in 2024 and then check your state to see if there's any "inheritance taxes". Again, no federal inheritance taxes. But the next thing I want to cover is social security benefits, because when, and a lot of people don't think about this one. When a loved one passes away, it's important.

It's absolutely crucial that you contact the social security administration because here's a deal. It's not a lot of money, but you want to contact them. The SSA or Social Security Administration provides a one time lump sum death benefit of $255 to the surviving spouse or eligible dependents. Now, if you're thinking, Ralph, big deal, $255, why bother?

Well, here's the thing. You're going to want to notify them of their passing because what you don't want to happen. I've seen this happen a few times is you don't want those social security benefits to continue. Because then all of a sudden this money's coming into this account. I see this a lot with a married couple and one party passes away and the other party doesn't notify Social Security.

And what happens is they continue getting those Social Security benefits. Now I will tell you, in my experience, the social security administration must have people who read the obituary sections of the newspaper or they're subscribing to these lists. The people who have passed away, because usually they already know, but here's the problem.

If you don't tell them, they could continue sending those payments. They're all direct deposit now, but then all of a sudden three or four months into it, they find out they're going to grab that money back and that money may have been spent. So notify the social security administration of the death and apply for that death benefit if you're eligible.
Now you also, here's the other reason you want to do this. You may be eligible for survivor benefits based on your husband's work history. Gretchen, I don't know your particular situation, but you may be able to increase the amount if you're already collecting social security. I'm making an assumption since you've been married for 30 years, I'm making a strong assumption there, but you may be able to collect those survivor benefits, which could be greater than your normal social security benefits.

So another reason to contact the social security administration and apply for these benefits because now, one of the things we haven't talked about. And I'm not going to spend a lot of time talking about it today, but there could be a big issue with all of a sudden your income has shrunk.

Maybe that's one of the stress points. One of the uncertainties, you know, you've always counted on your husband's social security benefits or your husband's pension money. Well, this is one, and I've worked with many clients that we've been able to find them additional benefits. So again, reach out to social security administration, explain to them that your husband or your wife, if you're listening to this, you're not Gretchen, you're listening, somebody else, has passed away and see if you qualify for those benefits. Now they might say, Hey, your benefits are better. They're not going to make you take something that's lower. So that's another one. That's number five. That's that social security. And number six on my list. And this one is absolutely critical and it gets missed so many times.

You got to make sure you update ownership and beneficiary information. So after your husband's death, Gretchen, you may need to update ownership and beneficiary information, assets and accounts. You may have a home that you own with your husband. You're going to want to talk to an attorney about having that deed transferred.

You want to talk about vehicles, all those types of things and make sure, make sure absolutely modify beneficiary designations on things such as life insurance policies or retirement accounts because now that your husband's passed away, maybe he was the beneficiary on your life insurance or on your retirement account.

Now you've got a decision to make. Who am I going to make the beneficiary? But so many times it gets forgotten. And then, you know, husband and wife pass away. It happens. It's a sad situation, but I see it routinely where husband passes away and it's not six months later, the wife passes away or vice versa.

And if you don't take the time to change those beneficiary designations, you could have a big problem, especially with retirement accounts. Who are they going to go to? So this is the time to update those and ensure that ownership and beneficiary information is up to date because that can prevent a ton of future complications.

And it makes sure that your assets are distributed according to your or your husband's wishes. Now we taught a lot there. That was those five things. Like I said, the two I added was the social security and those beneficiary things. Now I'm going to take it just a minute because I want you to understand some of the terms I've used in some of the forms.

Now, the first one is the 1040 form. You're probably used to this one, Gretchen. This is the typical individual or joint tax return that you're filing, where you're putting all your income and all your credits and deductions. That one is going to be a definite, assuming that you have income or the person you're handling their affairs or had income.

The second one is the 1041 report. That's if they have that estate or let's say that there wasn't a will or assets weren't immediately distributed to somebody and they sat in this estate. You could have a lot of cash and the estate earned income. They earned interest income. If it's greater than $600 or you had rental income, there's a whole bunch of other things.

Then you've got to file that 1041 or that estate tax return. The third form is the form 706. This is if you have that more than $13.6 million, you're going to file a form 706, which is the federal estate tax exemption. And finally, another one you might come across here, Gretchen, if you work with somebody to handle preparing your taxes, there's a form 1310 and what the 1310 form is so if somebody asks you, Hey, Gretchen, you got to sign this 1310 form. Don't worry. It's very normal. It's a tax form from the IRS that used to claim the refund of a deceased person. So let's say for example, Gretchen, this wasn't your husband who passed away, but say it's your brother, Carl, right? So Carl passes away.

And you've always told Carl, Hey, Carl, when you pass away, I'm going to handle all your situations, all your financial situations. Well, you can't file a joint tax return with Carl because he's not your husband. So when you file that tax return and you want to claim that refund, and maybe you're going to get that refund and give it to his children or whatever his will looks like, you're going to have to fill out form 1310.

People like me, tax preparers will know this, professionals will understand this, and they'll make you do it. So Gretchen, you might be thinking, okay, where do I even get started? So let me talk about some of the procedures and then Gretchen, one of the things I heard in your letter was I don't really handle this.

I've never handled this before. So here's some things I want to encourage you to do. You're going to gather some necessary documents. A lot of people don't think about this. When they come in to meet with me, I need to see some things. First thing is get a copy of the death certificate. I want to keep a copy of that in my file.

I want to make sure that's noted on the tax return. If there's a will, if there's trust documents, any financial records, those are things that somebody like myself or whoever's handling your tax affairs, maybe your attorney needs to look at, and then you're going to determine the filing responsibilities.

You're going to identify who the executor is. Maybe there's a personal representative that's responsible for filing those tax returns and paying any outstanding taxes. Now in the husband and wife situation, you're going to probably file a joint  tax return, no big deal here. But in that situation like I  said, maybe it's your brother Carl or your grandmother or your mother. If an executor is named in your will they are typically responsible for these tasks so here's another thing if somebody says to you hey would you be an executor of my estate understand what that means. One of the things you're going to have to do is  you're going to handle their final affairs.   One of the final affairs, could   very well be handling filing that final tax return.

I do this every day with clients. It's not this insurmountable thing. It's very manageable. You just have to make sure you work with somebody to help you put that information together. Another thing you want to do, and a lot of people miss this one. You want to contact all the relevant parties. You might be saying, Ralph, who are the relevant parties?
Well, I would recommend notifying credit bureaus. Let them know that your husband has passed away because you don't want somebody going out there and stealing his dead identity. And it sounds harsh the way I said that didn't mean it to come off as being calloused. But you don't want somebody to take advantage of that and potentially run up debts.

You want to contact the bank, make sure their bank account, if you have a joint bank account, make sure it's changed. And that's why when you're meeting with the funeral folks, you want to get several copies of the death certificate. I know this sounds morbid, but get several copies because you'll find it.

It seems like everybody wants one. Now you don't need 20 of them. I remember when my mother passed away, it's like the guy said to us, well, how many copies of the death certificate do you need? I said, well, I think if you give us six, that will be fine. He goes, well, a lot of people want 20, but the reason they want 20 are the reason that the funeral director wants you to get 20 is they charge you for each of those.

You also want to look at any online service providers, notify them about the death. You know, one of my personal pet peeves is people who pass away and they've got social media accounts. And it's so terrible. Like just two weeks ago, as a friend of the family, he passed away rather young. And I'm looking at my Facebook profile and up pops up, Hey, happy birthday.

His name was Coach. Happy birthday Coach. Well Coach has been dead for a year and a half. And again, the reason that you want to do that, it can help prevent identity theft, because if that person's still lingering out there online or on the credit bureau at the bank, there is opportunity for the cyber criminals to find that information and take advantage of it.

So that's just one of the things I recommend you do is contact those relevant parties. Another thing I'm going to recommend you do, and you've heard me say this several times now. It's time to seek professional assistance. This is not your do it yourself project. Talk to a professional tax advisor. Talk to an attorney if there are legal questions, especially if you've got complex tax situations.

Maybe there was a trust set up. Maybe there was a revocable trust or irrevocable trust. Maybe they're interesting relationships with former children or ex children or whatever you want to call those. It's a blended family thing. It is time to reach in and talk to somebody, spend a few dollars and make sure you've got all of your information lined up.
You make sure your I's are dotted and your T's are crossed because what you don't want to have, you want to be able to put a bow on this and put it down and be done with it. You don't want to have these things lingering on and lingering on. And unfortunately I've seen this in my practice where somebody tried to do it themselves.

And I'm not saying you can't do it yourself. You can spend a whole lot of time learning all this code, learning all the different pieces, but listen, you're going to handle it once or twice in your whole life. This is what I do for a living. So reach out and contact that professional. Now, another thing I'm going to recommend you do is make sure you understand the tax deadlines.

A lot of people don't understand this one either, that 1040 is still due during the normal tax filing, you know, timeframes because you want to make sure you don't miss on this. You want to make sure you're, you got all that income reported because honesty and accuracy and filing these taxes is essential and it's not just for legal compliance.

This is where, you know, the non secular Ralph comes out. This is a show about Christian faith. So one of the things that you really need to challenge yourself with is honesty and accuracy in your tax filings is essential. And like I said, not only for compliance legally, but it's also part of your Christian values about integrity and stewardship.


So let's talk about some of the tax implications. We kind of work through what are the taxes you need to file? What are the things you need to do? But let's talk about some of the tax implications because scratching one of the next thing you might be thinking is okay, Ralph.

I don't know how all this is going to play out. So let me give you some basic information. Let's start with bank accounts. So inherited cash in bank accounts is generally not taxable unless the estate exceeds that applicable estate or inheritance tax threshold. So if your mother passes away and you're the beneficiary of her checking account, and there's $20,000 in that, there is absolutely no tax ramification to that.

Unless she has more than $13.6 million or if your state has a state inheritance taxes. Now here's the thing you need to understand though. Any interest that's earned on that account after the date of death is taxable to whoever the beneficiary is. So let's use a simple example, Gretchen. Let's say it's not your husband that we're talking about.

It's your mother passed away now your mother left you as the beneficiary of her checking and savings account to make it like I said, let's say there's $20,000 in there. And when she passes away, the bank is going to issue a 1099 for the interest that was earned.

Now, this is assuming that you contact the bank, which is one of the reasons I mentioned that, but the bank is going to issue two interest statements for that year. The first one is the interest that was earned while your mom was alive. So let's just say your mother passed away in April, right? So the bank is going to issue that 1099 or that interest statement from January to April. That's going to be on your mother's final income tax return. Then if you do all these things right, then you're going to pay tax on the interest that's earned after that because the account will be transferred into your name, which is the main reason why I said contact the bank, contact the credit union, contact any brokerage firm so they can set this up at the beginning.

All the time I see this where people forget about that. And then all of a sudden they've got this account that's still in mom's name and it's still earning income well after she passed away and the bank is sending these statements. Mom's passed away. They're sending statements under her social security number.

The IRS is getting them and there's no need to file a tax return if it had been handled correctly. So that's the first thing. Bank accounts. Second thing. Retirement accounts. These are your traditional IRAs, your 401ks, or any other retirement accounts may be subject to income tax when they're inherited.

I did a show the other day and I said this statement, a lot of people laugh when I said this, the IRS is going to get their pound of flesh now or later. Well, if your loved one or the person you're the beneficiary of had put money into pre tax money, that's the 401ks. That's the traditional IRAs. When you get that money as the beneficiary, and there's a whole bunch of laws in this, I've done many shows on this, I'm not going to talk about today, but the beneficiary typically has to pay taxes on the withdrawals from those accounts.

So if you inherit someone's IRA, or if you are the beneficiary of someone's 401k, be aware, again, this is the time to schedule a visit with a tax professional so that you'll understand the impact because there are decisions you can make depending upon your relationship, but be aware, you're going to pay tax on that.

Now if it's a Roth IRA, which is an after tax, there are generally no taxes on that, but again, certain things need to be met. So that's the second thing. That's those retirement accounts. Let's talk about life insurance because a lot of people have life insurance and they're amazed when I tell them what I'm getting ready to say here, Gretchen.

Life insurance proceeds are generally not taxable to the beneficiary if received at a lump sum. Now I'm saying that because of my next thing I'm getting ready to say. If the proceeds are paid in installments, in other words, let's say when you get, use you as an example, Gretchen. So your husband just passed away and let's say he had a hundred thousand dollar life insurance policy.

You've notified the insurance company and they say to you, okay, Gretchen, how would you like to handle this? But here's a little thing that the insurance companies will try to do. They'll try to say, Hey Gretchen, you don't need all that money right now. Let's pay you in installments because it's a cashflow thing for the insurance company.

Well, it's not gonna be taxable to you, but if you say, okay, that's fine. You know what? I don't need a hundred thousand dollars all at once. And there's a whole bunch of decisions that. Talk to your tax professional about this or your financial advisor, but let's just say you say no, I'm gonna take it in installments.

I'm gonna take, let's say, $10,000 a year for the next 10 years. Well then any interest that's earned on that account from the, from the time, see when your husband passed away, that life insurance is going to be paid out to you and they may pay it out into an interest earning account at the insurance company.

And the only thing that the only reason to bring this up is a lot of people aren't aware of this. So if that proceeds or those, those beneficiary dollars from that life insurance gains any interest, you're going to pay tax on that. And it's not complicated. At the end of the year, the insurance company is going to send you interest forms, a 1099 INT, but just be aware of that.

Cause a lot of people don't know about that. So that's life insurance policies. Well, let's talk about securities. These are things such as stocks and bonds. One of the beautiful things about someone passing away, not good that they passed away, but here's one of the beautiful tax things you get what's called stepped-up basis.

And I talked about this on a show last week. Let me tell you what that means, Gretchen. Cause I think this may apply to you. It definitely apply to other people listening. That means that the cost basis now, why is the cost basis important? If you ever sell that investment, that stock or bond, that cost basis is going to be the floor.

So that, if someone passes away and they leave you this, that cost basis is adjusted to the fair market value at the date of their death. So let's use your mom as an example again, Gretchen. So your mom passes away and she's got $10,000 worth of Apple stock. So on the day your mom passed away, and I say $10,000 because I'm saying that's the fair market value.
Well, your mother might've bought that Apple stock 20, 30 years ago. She may have paid peanuts for it. Well, on the date she passes away, someone needs to keep track of that and say, okay, well on the date, and there's a lot of online tools you can do this with now, but on the day she passed away, whatever the value of that Apple stock is, that's what's going to be what we call your cost basis.

Now, why is that important? Well, if you turn around and sell that stock at any time in the future, your capital gain, the amount of the income you're going to have in a tax you're going to be paying is based on that adjusted basis. So let's use a simple example. Let's just say, we talk about that $10,000 in Apple stock, but let's say your mom only paid a thousand dollars for it back 30 years ago.

So without that stepped-up basis, you turn around and sell that you've got a $9,000 capital gain. Right. That's just the $10,000 it's worth now, the sales price minus what you paid for it. But in your case, you don't have to worry about that because you get that stepped up basis. So effectively there's no tax, there's no tax cost to that because the value you sell it for is the value that it's worth.

And it's assuming that you sell it on the same day and there's not a big market fluctuation. But that's really what we're talking about. We're talking about stocks and bonds. Just remember that stepped up basis thing. Cause a lot of people are surprised when they come in and meet with me. And I say to them, Hey, what was the value of that stock on the day
your mom or your dad or your brother died? And you're like, well, why do I need to know that? Well, that's why. Let's talk about real estate. So inherited real estate also benefits from that step-up in basis. Again, you can minimize your capital gains taxes, if the beneficiary decides to sell the property. So later on, and I just had a client I was talking to about this yesterday.

A lot of people don't think about this one because they're involved in the grief. Gretchen or like you, they're going through the loss of a husband of 30 years. One of the things you want to do now, Gretchen, again, your situation is different, but I'm trying to cover a lot of bases. You get different situation because it's your husband.

Let's just say, let's go back to your mom as an example again. So your mom makes you the beneficiary of her home. And she bought this home back in 1950 and she paid a whopping $20,000 for this house. Well, fast forward to 2025, her house is now worth a half a million dollars. Well without this stepped up basis, the capital gain for you would be a half a million dollars because it basically, she paid nothing for it.

So here's a little pro tip. Have a real estate agent go out and do a market analysis on or about the time that your mom passes away. Now, obviously you're not going to do it at the funeral. That's silly. But within a reasonable amount of time, somewhere between maybe 15 or 30 days, just call real estate agent and say, listen.

My mom passed away. I need to have a market analysis done to this property and then put that in a file somewhere. Because at some point, if you sell your mom's property, you're going to need that because somebody like me's going to say, okay, Gretchen, what was the value of that property on the day your mother passed away?

Because that's going to limit that capital gain. Because if you think about, let's just say in that same example, you get past a funeral, you get all your mom's stuff settled. And six months later you decide, you know what? I don't need my mom's house. I'm going to sell her house. . Well, you're gonna go back and look at that fair market value, and let's just say within six months the property doesn't change that again, we have no tax situations.
So that's one of the things you wanna understand about real estate, because a lot of people let that go and it just, oh, my brother's gonna live there for a while, or this, we're gonna do this, we're gonna do that, and they forget about that step of getting that market evaluation because here's another thing that can happen.

I've seen this happen several times in my practice. The value of that property could actually go down. Maybe there was a, it's a bad neighborhood, or something happens to the house. Well, you could get a capital loss where you actually get a write off against your income. And like I said, there's a ton of rules with that, but understand that real estate stuff.

Now, one of the other things I want to mention is inheriting a business, and this gets very complicated, but I'm going to give you sort of a basic piece of information here. If you inherit a business from a loved one, you'll need to handle business taxes because not only is there that personal taxes so Gretchen, when we talked about it with your husband, let's just say your husband had a consulting business. Well, not only are you going to have to file a 1040 for you and his personal income tax return, but if he had a corporation or a partnership or a two member LLC, you may very well have to do a business tax return as well.

So that would be included in this whole planning process. And one of the things a lot of people don't think about, make sure that you work with an accountant or something like that to make sure all the payroll reports are filed, if you had employees in the business. But that can be a big deal. And this is also an area where it might trigger that bigger estate tax, because now we're not just talking about personal assets.

You know, we value all the estate. Maybe it's a house or cars, maybe a rental property, but now all of a sudden you've got this business. So you've got to really look at what is the value of that business, because that could very well push that over that $13.6 million. Again, I don't think that happens very often, but it's something to be aware of.
So now I thought I'd fit, I'd share a few real life experiences. This is some comments I've gotten over the years. Because here's the truth. Dealing with taxes after the loss of a loved one can be one of the most emotionally and logistically challenging things you're going to deal. I got this from my email from someone who faced these difficulties and I wanted to share it with everybody today.

Gretchen, I think you'll find some solace in this. And this one, this person wrote, "My grandmother passed away in 1997, and unbeknownst to my father or my grandmother at the time of writing her will, he suddenly had to pay a significant estate tax on the appraised value of the family land. Years later, when my father passed away, we faced a similar situation with estate taxes on his ranch.

We had a plan to minimize the tax burden, but we didn't have enough time to fully implement it. Now, we are burdened with two estate tax payments every year, one from my grandmother's estate and one for my my father's estate. We'll be making these payments for 15 years." So Gretchen, I don't think you're in this case, but if you're somebody else listening and you've got some complications, it is so important to plan these things.

So we've talked about what happens when someone passes away, how to do it. But I want to just leave at the end of the show here with a little bit of planning. You need to start thinking about these things before you're on your deathbed. Start doing that estate plan. It is huge and it can help you minimize tax burdens for beneficiaries.

It also talks about the emotional toll. That email was rough because I'm thinking, wow. If they had just had that planning, if they had that forethought and put things together, could have taken a lot of emotion away. And then we wouldn't have had 15 years of tax returns. I just wanted to add that to the discussion today because you know, I did an interview with my attorney.

It was back in February, a year ago now. And I encourage you to check that one out too. It's on our website at askralph.com. And my attorney, Kevin said something brilliant. He said, Ralph, you can't generally control when you die. You don't have much control over that. But you can control how things play out after you die.

So one of my key takeaways today is put those things in order, put that estate plan and meet with that attorney. Good friend of mine, Bob has been writing about this on Facebook the last few days. I think he's getting ready to go meet his maker. He's in good health. I mean, for a guy that's almost 80, he might even be 80. And I apologize, Bob, if I got it wrong, but he is a viral guy, but here's the thing, he listens to me, he listens to other people and he's putting his affairs in order so he doesn't burden his beneficiaries later on. But I think I've kind of covered that. So Gretchen, the only other things I want to do is I want to give you a couple more pieces of biblical guidance, because I feel like these can help you.

Cause I really feel like these are just very reassuring. Because the Bible talks about, we talked about Matthew 5:4, "blessed are those who mourn, for they will be comforted." It reminds us that God is with us in our sorrows and offers comfort and hope.

But I found a couple of others that I think are just so important because it's easy to navigate this from a financial standpoint. And I know Gretchen, you might not feel like that. You might be like, Oh, Ralph, this is stuff I don't understand, but see, you can hire somebody to help you. But this part of it, the emotional side of this is the part is going to be continuing on after you're done with the financial side, like I'd meet with clients all the time whose husbands or wives had passed away. I just had that yesterday. Client had been married for 30 plus years and he pulled up and he says, Ralph, one of the things I had to do today was I had to go and buy out the lease for my car.

And I said, okay, I said, that was your decision. He goes, but that was the last car that Susan ever rode in. And see, that wasn't a financial decision. That was an emotional decision. That's why we've got to look to the Bible. You got to look to the Lord for this. So let's be, I'm going to throw a couple more out there.

And that's John chapter 14, verse 27 says, "Peace I leave you; my peace I give you. I do not give to you as the world gives. Do not let your hearts be troubled, and do not let them be afraid." Think about the value in that. See, Jesus offers us His peace and it surpasses all understanding to help us through these difficult times.

And the final one, and I love the book of Romans. If you listen to me, you know I talk about the book of Romans all the time. Romans chapter 8, verse 28 says this. And it's so reassuring. I know when I was going through my mother's funeral, and I did the eulogy at my mother's funeral.

It was so powerful for me. And this is what it says, Romans 8:28 it says, "And we know that in all things God works for the good of those who love him. We've been called according to his purpose." So Gretchen and everyone else, listen and hear me on this. Even in the midst of loss and grief, we can trust that God is working for our good.

And it finally reminds us this, that God is our source of comfort. He's our source of strength during these difficult times. He's near to us. He isn't far away. So call on him, pray about it. When you're having a tough day, Gretchen, and you're wondering, how am I going to get through? Just reach out to Jesus and say, Jesus, help me now. I need you. And I encourage you to do that and support people who are going through it. Maybe you're not going through it yourself. Maybe you're listening. And it's like Ralph, I don't have a spouse or you know, I'm not losing my spouse. But put yourself in there, you know, pray for people, reach out and take them to lunch or something like that, because there is peace and there is hope.

And here's my big takeaway for today as Christians, we can find solace in His presence and trust in His plan.

Now I know I covered a lot today, its a lot to take in, but one of the things that's great about what I do now is I also write a blog post every day. So if you weren't able to digest that, of course you can go back and listen to it again.

And I encourage you to do that. But if you want to get more in depth and look at the topic, I've got a bunch of references. I've got some resource material. You can check out our daily blog post at askralphpodcast.com/blog. That's where I get all the information for today. You can double check what I've said, but it's really a great resource.
And they're out there for every single episode we've ever done. So I encourage you to check that out. Again, that's at askralphpodcast.com/blog.

Well, let's get to our reflection questions for today. Cause I want to just unwind a little bit we've talked about.

So let's start with that. I got three for today as normal. Number one thing, what small step can you take today to address the tax implications after the loss of my loved one? What is that? You can do if you've lost somebody. What's a small step that you can take because you're dealing with grief, you're dealing with unimaginable pain, but what's one step you can take today to try to get through that process.

So that's number one. Number two, how can I rely on my faith that guide me through this challenging time? I think we've covered that. We talked about those Bible verses and know that Christ is with you during this whole process. He says, he'll never leave us nor forsake us. So look to that comfort, look to that strength and reach out during these difficult times.

And number three, and this one is absolutely crucial. If you do nothing else with today's episode, I want to encourage you to do this. Ask yourself this question. What changes can I make to ensure that my financial affairs are in order for my loved ones? Don't leave them with a burden. I've seen this happen and play out so many times where the person who passed away could have done, would have done, should have done.

I mean, my grandma used to say that would have, could have, should have ought to. Probably not proper English, but she used to say that. This is an opportunity to do that. Like I said with my attorney, you can't control when you're going to pass away, but you can control how your affairs play out. So do that. Now ask yourself, what changes can I make to ensure that my financial affairs are in order for my loved ones.

Well Gretchen, I want to personally invite you to take the next step in your journey. I know there's a lot that we've covered today, but here's the beauty of this.
You do not have to navigate these tax complex tax issues alone. I'm here to help you every step of the way. Now, what do you do? You can book a call with me, go right to askralph.com. At the top of the screen, you'll see a button that says, book a call. If you're feeling overwhelmed and you need individual guidance, let's talk one-on-one, because everybody's situation is different.

So I encourage you book that call with me. And during the call, we'll discuss your specific situation and I can provide you a tailored advice and a clear action plan. I can help you with this. Again, just go to askralph.com. Click on that button that says book a call with Ralph. It's that easy. So let's schedule a time that works best for you and together we'll tackle these tax matters head on. Now, when you book that call with me, here's what you can expect. I like to tell people what they can expect ahead of time. It is a safe and judgment free space. You can share your story. You can tell me all about your loved one and tell me all about your concerns.

And I'm going to tailor a personalized plan to give you the advice you need. I'm going to give you a step by step action plan to help you navigate the tax implications, help you navigate all the things we talked about today. But here's the other part of that as your Christian, you know, financial evangelist, I'm going to give you encouragement.

I'm going to give you support, not like the secular folks. I'm going to give you that encouragement. I'm going to give you that support to help you through this challenging time. It's also an opportunity to ask any questions you may have and get a clear, concise answer. So I would encourage you by booking that call, you're going to gain clarity on the tax implications and your responsibilities. You're going to have peace of mind, knowing that you're taking care of those important financial matters. You're going to have a better understanding of the tax laws and how they apply to your situation. And here's the big thing. You're going to have a sense of control and empowerment as you take these proactive steps to manage your finances from a supportive ally who understands your grief. I've been there. I know what it's like. I've never lost a spouse. Let me be clear about that. But I've worked with so many people that have lost them.

It is truly a devastating thing. And I'm committed to helping you, but don't just take my word for it. I got a couple of testimonials here. Someone said this the other day, it says "Ralph guidance was invaluable during a very difficult time. He made the complex tax issues easy to understand and help me create a plan to tackle them."

Another person wrote, "I felt so lost after my husband passed away, but Ralph's compassion and expertise made all the difference. I'm so grateful for his help." And finally I got this one and this one just absolutely made me feel great. This is from a guy named David. He said, "Ralph truly cares about his clients.

He took the time to understand my situation and provided me with personalized advice that made a real difference." That's what I bring to the table. Now, if you find value in the show and in the guidance I provide, I'm going to invite you to support us. Now, how do you do that? Well, you can buy me a virtual cup of coffee at askralphpodcast.com/support. Now, no one's going to arrive at my office door here with a coffee. I don't even drink coffee, but it's a virtual thing. It's a way to give support to the program. And you might be saying, Ralph, but why do you do that? Because it allows us to continue to spread this message of hope, this message of financial wisdom and this message of Christian faith to others who need it. Because listen, like I said, the beginning, there are two certainties in life, death and taxes, and your support makes a real difference. It helps us reach more people. It helps us create more content and provides more resources to help others navigate their financial journey.

So why don't you consider that? Just go to askralphpodcast.com/support. And listen, don't forget about this either. You're part of a community. If you listen to me every day, you're a member of the tribe. And if you know somebody who can benefit from this episode, do me a huge favor and do them a favor, share it with them.

Just simply say to them, Hey, look, I just heard a guy talk about this. Ralph talks all about Christian faith and mending your finances together. Just send them to askralph.com. They can find all of our resources. They can find all our episodes there. And then what happens is something beautiful. We can support and uplift each other.

And you never know who might be going through a similar situation and could use some help and encouragement. So Gretchen, as I close today, I encourage you take the first steps today. Don't wait till tomorrow, book a call with me. Let's work together to navigate these tax issues and find a path forward because you don't have to go through this alone.
I'm here for you. Let's make a plan. Let's take action and find some peace of mind together. So Gretchen, as I close today, we've covered the essential steps to navigate tax matters after the loss of your husband. We talked about filing those tax returns, dealing with inheritance taxes, and I've given you some practical action steps that will help guide you through this challenging time.

We discussed the importance of understanding tax implications. I think you heard me when I said to seek professional guidance when needed. But bigger than that, most of all, we've anchored that in biblical principles for comfort and strength. Well, tomorrow I'm going to talk about something completely different. We're moving past taxes and we're moving past death.

We're going to be talking about something that's equally emotional. And I want you, I want to encourage you to listen to this one tomorrow. I'm going to answer a simple question. It's not a simple question, but it's a question of somebody sends in. Can my marriage survive the secret of my financial infidelity?

I'm not talking about marital infidelity. I'm talking about financial infidelity. It happens all the time. It's a conversation you don't want to miss because I'm going to explore both the emotional and the financial aspects of this issue. And I'm going to provide guidance on how to rebuild trust and rebuild that financial stability.

Remember this Gretchen. My passion is to help you achieve financial success. And anybody else listening, I want to see you live out your dreams and I want to see you grow in your faith. And I know together, working together, we can master your finances from a Christian perspective. So as I always end the show, stay financially savvy and may God bless you.

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