Q: What happens once the funds in an estate are not enough to cover the inheritance tax on the realestate?

A: First of all, if you have not already done so, you need to consult a lawyer to represent the estate.

Inheritance taxes are obligations of the inheritor, not of the estate. Most often, however, a testator writes a Will that shifts that tax burden to the estate. Thus, the first question is for a lawyer to examine the Will and advise you if the Will provided for inheritance taxes to be paid by the estate.

If the Will does not provide that the estate is to pay inheritance taxes, the taxes on the house are a problem for the girlfriend, not the estate. If the Will does provide that the estate is to pay inheritance taxes, the rule is that the residuary estate is the first place that the taxes are to come from. If there are insufficient assets in the residuary estate, any other assets in the estate would be proportionately reduced to pay the taxes. If the house is the only other asset in the estate, it gets increasingly complicated. If your father and the girlfriend owned as joint tenants, she takes the house by right of survivorship, which is automatic and free and clear. If they owned the house as tenants in common, your father’s half interest would have to be sold to pay the taxes. Realistically, however, the only person who would buy that half interest is the girlfriend.

This is a very complicated problem, and you need a lawyer to work it out.

A: If you have not done so yet, you need suggest your first step would be to read a copy of the deed. The deed will say whether your son and his girlfriend owned the property as “tenants in common” or as “joint tenants with rights of survive

A: Sorry - I hit the submit button without finishing my answer.

What I was trying to say is that if the deed names your son and his girlfriend as “joint tenants with rights of survivorship”, then the property cannot be inherited through a Will, but by the operation of real estate law and the girlfriend will automatically own the entire property upon the death of your son. In such case it doesn’t matter what your son’s Will provides. She will own the entire property according to real estate law, meaning that no income or estate taxes apply. But, often, the wording of a deed is unclear as to whether title was held as tenants in common or as joint tenants. So, I agree with Mr Scoblionko that your best course of action would be to engage a local trust and estates attorney to review the situation.