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New York State estate question.
Old 07-26-2013, 06:19 PM   #1
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New York State estate question.

A friend recounted this to me and I didn't know what sort of advice to provide, particularly with NY specific issues. Any help much appreciated.

The friend has an in-law leaving a significant sum to her two young adult children. One child is pretty much incapable of dealing with life on their own and still lives at home.

By a significant sum, I mean three or four dozen FDIC insured bank accounts, each with $250K, probably in CDs (the in-law is terrified of spending / loosing money and will not invest). The amount is certainly well above the $5M Federal Estate tax limit.

Now, the problem is - there is no will other than a DIY form from some internet site. All accounts are somehow flagged as joint or transfer on death and instructions on how to access them have been provided.

The rich idiot involved in this apparently feels that they will be dead and won't care what happens, the kids can just deal with it. Because of the uncertainty of this, my friend is reserving a significant chunk of their retirement to be used by a trust to care for the kids.

Should my friend push the issue and even pay for some sort of estate planning for the in-law? This will be very hard to do, since the in-law feels it is not their problem and does not want any money wasted on lawyers.
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Old 07-26-2013, 07:03 PM   #2
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Penny wise, pound foolish....

Even if your friend were to engage a lawyer, how would the lawyer get the information needed to assess the situation and provide some sensible advice?

IMO given the significant amounts involved, unless the benefactor doesn't care if the state intervenes and takes a bunch of the money he intends to go to his heirs, there is not much you can do.

Just proves that just because you're rich doesn't mean that you aren't stoopid.
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Old 07-26-2013, 07:09 PM   #3
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Your friend could butt in to complain about the plan and the resulting hassle could inspire the benefactor to leave the millions to someone else. It seems to me there is very little standing to be interfering with this gift horse and much damage that can be done.

Maybe the time and effort devoted to worrying about the in-laws estate plans could be devoted instead to getting the adult child into a better position to deal with their future.
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Old 07-26-2013, 08:31 PM   #4
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the kids can just deal with it.
Yes, the kids can. They can hire a lawyer after their parents death to handle things. With a copy of the will and knowledge of where the accounts are, there shouldn't be an issue.

The "normal" sibling can do the ethical thing and be sure that the special needs sibling receives his/her full share and that the money is properly invested and held for his/her benefit.

There also might be a surprise discovered at the parents' death. There might be a trust for the special needs child or some other arrangement that the parents don't want to talk about now.

Do yourself a favor and stay at arms length on this.
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Old 07-26-2013, 08:54 PM   #5
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The estate will have to pay the taxes due(federal above 5.25m for 2013, NY State over 1m) but if the accounts are all joint or POD, that's who will get that money regardless of what the will says.
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Old 07-26-2013, 09:39 PM   #6
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The estate will have to pay the taxes due(federal above 5.25m for 2013, NY State over 1m) but if the accounts are all joint or POD, that's who will get that money regardless of what the will says.
Note that the administrator can claw back amounts from the POD accounts to pay the estate taxes due. (At least on the federal side). I agree that besides the Feds and Albany, the PODs will control.
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Old 07-26-2013, 09:46 PM   #7
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Note that the administrator can claw back amounts from the POD accounts to pay the estate taxes due. (At least on the federal side). I agree that besides the Feds and Albany, the PODs will control.
Because we're talking about a cash inheritance, the claw back process won't be all that painful. It's not like the kids are inheriting a $10M business which would have to be liquidated in order to give the feds and the state their shares.

I wish I had a problem like this in my life, on either the giving or receiving end.
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Old 07-26-2013, 10:50 PM   #8
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Because we're talking about a cash inheritance, the claw back process won't be all that painful. It's not like the kids are inheriting a $10M business which would have to be liquidated in order to give the feds and the state their shares.

I wish I had a problem like this in my life, on either the giving or receiving end.
That is assuming the cash has not been spent in the 9 months (when the estate tax return and payment is due). With POD accounts you can get them once you get a death certificate. Depending on the reciepent the money could be gone.
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Old 07-26-2013, 11:17 PM   #9
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That is assuming the cash has not been spent

Yeah.... I suppose if the administrator fails to warn the recipient that he'll be clawing back some money to pay the taxes, and the recipient really knows how to go through cash, it could be gone. Or the administrator and the recipient are working together to defraud the gov't and will eventually be living together in a thatched hut on a tropical island, wearing only smiles, for the rest of their lives.
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Old 07-27-2013, 08:27 AM   #10
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Just proves that just because you're rich doesn't mean that you aren't stoopid.
Or can spell...
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Old 07-27-2013, 03:06 PM   #11
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Thanks all. After reading a bit more about POD accounts, I can sort of see the logic - if I were a tightwad extraordinaire... At least the funds will bypass probate.

The in-law doesn't want to 'waste' money on estate planning or even maximizing annual gifts to the kids - also owns no home, car, computer or cell phone.
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