Dear Liz: <\/b>My home in Pacific Palisades is still standing after January\u2019s fire, but was damaged by smoke and ash. The remediators deemed hundreds of personal property items unsalvageable. Our insurance company is paying us a highly depreciated amount for these items, with the full amount to be received upon the actual purchase of each replacement. <\/p>\n
Since we won\u2019t replace every item, we\u2019ll end up with a sizable loss, which I understand can be claimed on our 2024 or 2025 tax return. I\u2019m concerned that we won\u2019t know the total amount of loss by the end of 2025. Could you please discuss how to handle this?<\/p>\n
Answer:<\/b> Casualty losses are deductible in the year you sustained the loss. That\u2019s typically the year the loss occurred, although you may be able to deduct the loss in the previous tax year when it\u2019s part of a federally declared disaster, such as the January 2025 wildfires in Los Angeles, says Mark Luscombe, principal analyst for Wolters Kluwer Tax & Accounting.<\/p>\n
However, you aren\u2019t considered to have sustained a loss if there remains a reasonable prospect of recovery through a claim for reimbursement, Luscombe says. You can\u2019t take the deduction until the tax year in which you can determine with reasonable certainty whether or not you will receive such reimbursement.<\/p>\n
If you won\u2019t know the amount of the loss by the end of 2025 due to this uncertainty, you can wait to deduct the loss until the year in which the amount of reimbursement is known, Luscombe says.<\/p>\n
For personal use property, the deductible loss is the lesser of the adjusted basis of the property (typically its cost) or the decrease in the fair market value of the property as a result of the casualty (which may be determined by an appraisal or the cost of repairing the property), Luscombe says.<\/p>\n
Dear Liz:<\/b> You recently answered a question about the consequences of giving up a timeshare. What are the possible consequences if a timeshare is held until the owner\u2019s death? What is the effect if it is included in a will or trust? If none of the potential heirs want it, what is the effect of not mentioning it in the will or trust? Can the company sue the prospective inheritors even if it were to go into default? What I\u2019m struggling to get at is what are the best options for handling it, depending on the desire of the prospective inheritors?<\/p>\n
Answer:<\/b> Timeshares typically have \u201cin perpetuity\u201d clauses that require owners to pay maintenance fees for life, and the requirement passes to anyone who inherits the timeshare.<\/p>\n
Fortunately, no one is forced to accept such an inheritance. Potential heirs can \u201cdisclaim\u201d or refuse to accept the timeshare after your death.<\/p>\n
How your heirs go about this depends on the type of timeshare. If the timeshare includes a real estate deed, or if it\u2019s specifically mentioned in your will or trust, then your heirs may need to file a written disclaimer with the probate court. If the timeshare was sold as a \u201cright to use\u201d contract, which is more common these days, the heirs can have the executor contact the resort to tell them the owner has died, so the resort can start the process of taking the timeshare back.<\/p>\n
This all assumes that you haven\u2019t already added the heirs\u2019 names to the timeshare deed, if one exists. Sometimes, timeshare salespeople promote this option as a \u201cconvenience,\u201d which it is \u2014 to the timeshare company, because it can hold the heirs responsible for the fees, whether they want the timeshare or not. To fix this, you can ask the resort developer to remove the additional names from the deed. If the developer balks, consider contacting an attorney.<\/p>\n