[rlassiter2]

My mother passed away in March of 2009 as a resident of Arizona. My sister and I are the sole beneficiaries of her estate, and I am the executor of her will. When we sell her house in Arizona and I am able to distribute the money in her estate, will my sister and I need to pay (1) inheritance taxes and/or (2) income taxes on this money? My sister lives in Wisconsin, and I live in Kansas.

[AK lawyer]

(1) No. Arizona does not impose an inheritance tax.

(2) No, it is not considered income.

BTW, unless the estate is worth more than $3,5 million (for a person who died in 2009), there wouldn't be a federal estate tax imposed either.

In which state are you probating the will?

[rlassiter2]

I live in Kansas. My name is on my mother's bank accounts in Arizona. When the house sells, I imagine I will have the checks made out to me, deposit the funds into this checking account, and write the estate distribution checks to my sister and myself from this Arizona-based bank account.

[AK lawyer]

I live in Kansas. My name is on my mother's bank accounts in Arizona. When the house sells, I imagine I will have the checks made out to me, deposit the funds into this checking account, and write the estate distribution checks to my sister and myself from this Arizona-based bank account.

Only problem with this plan is that, unless you have been issued letters testimentary from the probate court, the buyer probably won't make out the check to you.

[rlassiter2]

I don't have anything from the probate court per se; but I do have my mother's notarized will listing me as her representative in all legal and financial matters with regard to her estate. Her attorney tells me that's all I should need. I also have the Quit Claim Deed to her house, whereby upon her death, the house belongs to my sister and me.

[ebaines]

Regading the original tax question --

1. AZ does not have an estate tax, so as executor you don't need to worry about that in terms of settling your motrher's estate.

2. Neither WI nor KS have inheritance taxes, so you and your sister are clear on that as well.

3. There are no income tax implications either, UNLESS you sell the house for more than what its fair market value was of the date of death. In that case you and your sister may have a capital gain to report on your 2010 taxes.

[rlassiter2]

Thank you very much for your prompt responses. This is extremely helpful information.

[AK lawyer]

... I also have the Quit Claim Deed to her house, whereby upon her death, the house belongs to my sister and me.

Regading the original tax question --
...

If the mother transferred the house prior to her death, it could result in federal gift tax liability I suppose.