Options for my mother

[meierlde]

No, bank account rights of survivorship bypasses will and probate. Ownership is transferred at time of death. The only time they're included is if there's no will and/or no beneficiary designation. I should add there were several accounts left to me, joint tenancy w/rights of survivorship, POD and no beneficiaries listed. The one w/no beneficiaries was the only one that was included in the estate.

Except that if estate taxes are due the total has to be included in the estate tax filing. Just like insurance proceeds from policies that the deceased owned have to be included in the total. (Form 712 is the form for this from the insurance company)

 

[Dimsumkid]

Except that if estate taxes are due the total has to be included in the estate tax filing. Just like insurance proceeds from policies that the deceased owned have to be included in the total. (Form 712 is the form for this from the insurance company)

I'm not sure why it would be included for estate tax purposes since it's not even an estate asset. As far as probate, the attorney wasn't interested in beneficiary assets or life insurance in our situation.

 

[utrecht]

Can someone explain all this talk of estate tax? There are no Federal or State inheritance taxes in this case. Is the estate tax something different?

 

[W2R]

Can someone explain all this talk of estate tax? There are no Federal or State inheritance taxes in this case. Is the estate tax something different?

The estate tax is paid on the estate as a whole, by the executor.

Inheritance taxes are different and paid by the heir and calculated separately for each beneficiary.

There is no federal inheritance tax, and I think the federal estate tax is only on estates over around $5 million. States can impose either but I think inheritance taxes are disappearing in most states.

 

[utrecht]

Are the bank account and IRA that are not subject to
probate still considered part of the estate for estate tax purposes?

 

[MichaelB]

Are the bank account and IRA that are not subject to
probate still considered part of the estate for estate tax purposes?

Yes

 

[utrecht]

The estate tax is paid on the estate as a whole, by the executor.

Inheritance taxes are different and paid by the heir and calculated separately for each beneficiary.

There is no federal inheritance tax, and I think the federal estate tax is only on estates over around $5 million. States can impose either but I think inheritance taxes are disappearing in most states.

The estate is well under $5 million. There is no inheritance tax in Texas. Does that mean there is no tax at all to worry about?

 

[W2R]

The estate is well under $5 million. There is no inheritance tax in Texas. Does that mean there is no tax at all to worry about?

Check and see if there is an estate tax in Texas. Even better, maybe you should seriously consider getting a CPA to help you and doublecheck what you do. This stuff gets pretty complicated.

 

[Nords]

This money is legally mine, but morally I don't know if it is or not. Did she purposely leave it there to repay my wife and I for everything we did for her? I don't know. This bank account is a bit over half of her total assets and my brother and sister know about it. They just don't know any details.
I struggle with how to handle this. I really want to do what my mother would have wanted. Do I think I deserve more than they do? Well, I did 50 times more than they did for my mother, but I wasn't expecting to be paid for it.

I know I am the legal owner of the bank account but I don't know if that's what my mother wanted or not. She was a very savvy person so I think she may have done it on purpose. If she did, it was a very nice thing to do for me, but not a very nice thing to do TO me. I'm also fairly certain that she didnt tell my brother he was excluded from the will which is another not very nice thing to do to me since now I am going to be the one stuck with telling him.

Well, now it looks like you can put a dollar value on your family relationships.

Legally the money is yours. However if there's an ethical question in your mind then it's certainly more than a "question" in the minds of your siblings.

If you're not comfortable taking the money then don't take it. Simple as that. It's just money.

If you treat the money as part of the estate's assets then you'll have the moral high ground for any other controversies that arise.

If you torture yourself (and your siblings) with what your mother "meant" to do then you'll rationalize your way into a bad decision that will dog you the rest of your life...

 

[MichaelB]

The estate is well under $5 million. There is no inheritance tax in Texas. Does that mean there is no tax at all to worry about?

The IRAs will be subject to income tax when the funds are withdrawn, and withdrawals are subject to RMD.

 

[utrecht]

I guess inheritance tax and estate tax are two different things? There is neither in Texas and the estate is not big enough to trigger Federal taxes so I guess there are no taxes at all to worry about.

 

[sheehs1]

The IRAs will be subject to income tax when the funds are withdrawn, and withdrawals are subject to RMD.

To add to the above, the IRA's will be considered "Inherited IRA's" and typically there are 3 choices.
1. Lump Sum - all income tax due immediately
2. Five Year Payout - income tax stretched over 5 years
3. Annuitize it based on the beneficiaries life expectancy which will be subject to the yearly RMD.
(but now that I think about it, we had these choices because my moms IRA's were sitting with Annuity type companies - like ING). If your Moms is sitting at a bank, there may be different choices).
You will have to find out if it is qualified or unqualified money. Meaning, was it before tax or after tax money that originally went in. And don't take their word for it. Make sure you know the original source of the money. I say this because one company I dealt with, had the account coded wrong. It happens.

Companies may have developed other choices in the last few years. You have to speak to the company that holds the IRA. The IRA will be split into as many parts as there are beneficiaries. Each beneficiary can make their own independent decision.

It's not too early to get to work on this. It took me a long time to get the two companies my mom had IRA's with ...just to divide it into "parts".

If this IRA is invested in potentially risky assets, you might consider moving it to cash to protect the value. Or not. I depends on how you view where things are going. As Executor it is up to you to protect all assets. No one can fault you if you move it 'to cash".

 

[sheehs1]

Check and see if there is an estate tax in Texas. Even better, maybe you should seriously consider getting a CPA to help you and doublecheck what you do. This stuff gets pretty complicated.

+1

 

[utrecht]

If the IRA is considered an inherited IRA, can a beneficiary leave it as an IRA and not withdraw any money until they retire and pay taxes at that point?

 

[MichaelB]

If the IRA is considered an inherited IRA, can a beneficiary leave it as an IRA and not withdraw any money until they retire and pay taxes at that point?

No. Beneficiary IRA rules have a number of options, but if the original owner had already begun making distributions the beneficiary will need to do so as well, only based on his/her age. If distributions had not begun the rules are different but basically the funds will be distributed and taxes paid. You cannot roll over an inherited IRA into your own IRA.

 

[meierlde]

The estate is well under $5 million. There is no inheritance tax in Texas. Does that mean there is no tax at all to worry about?

It means there is no 706 tax to worry about (the estate tax) however there may well be estate income if bank accounts and the like pay interest while the estate settles, this is filed on form 1041. In Tx my lawyer told me the transfers don't happen until after you file the inventory with the court. In Tx the independent executor just has to do this step, listing whatever may pass by will. Upon filing then the distribution process can proceed. Form 1041 is handled by turbotax business. Note that if a trust becomes involved either by the will or when a revokable trust becomes non revokable it is also necessary to file a 1041 for it as well. During settling my fathers estate I had for one year to file an estate 1041 as well as a testimentary trust 1041.

 

[utrecht]

So I called my mothers electric company. I advised them of the situation and asked them to leave the service on but to suspend billing until the will was probated at which time I would pay the bill. They said they had no procedures in place that would make that possible.

 

[Walt34]

Just to clairfy, you do not have to take ownership of something if you do not want to.... so if he believes that it should be in the estate he can put it there by refusing the right of survivorship rule (IOW, disclaim that inheritence).... it then becomes part of her estate since he did not take ownership of the asset... (that is of course if there was not a secondary beneficiary named)...

That's what I did with an account that I was joint on with my mother. The amount was small, only a few thousand, but I was joint on it only because I was writing most of her checks for her. When it came time to settle the estate I simply wrote a short letter to the Registrar of Wills explaining why I was joint on it and waiving my right to the account so it went to the rest of the estate.

But that was an easy decision because I also knew that was my mother's intent.

Another way to look at it is in the context of the "ten year rule" as in "Will this matter in ten years?" I read about it in a column about a wise mother who applied that to her teenage daughter's whims. So it was okay for her daughter to dye her hair pink but she drew the line at a tattoo.

So what will be the effect on family relationships in ten years? And does it matter to you?

 

[Nords]

So I called my mothers electric company. I advised them of the situation and asked them to leave the service on but to suspend billing until the will was probated at which time I would pay the bill. They said they had no procedures in place that would make that possible.

When my grandfather stopped paying his utility bills (dementia), the utility companies fussed and fumed at him and wrote stern letters, but then they settled down and kept billing him while tacking on 1.5%/month interest charges.

For over four years.

My father didn't get a call from anyone until my grandfather stopped paying his rent... then the landlord jumped right in.

Could you just keep paying the utility bill from her checking account, and deduct it from everyone's share of the estate? That monthly expense will give the heirs a little incentive to sign the agreement for you to sell the place.

I guess the other alternative would be to stop paying the bills and see what happens. But that would get expensive and would probably be perceived as un-fiduciary behavior.

BTW your real billing issue may be the home's insurance. It's unoccupied, and many insurance policies have a 60-day clause on that. I don't know whether it's better to leave them in blissful ignorance or to promptly notify them.

 

[freebird5825]

...Also utrecht...you can not help how your mother left things. All you can do is follow the will and the beneficiary designations. Your hands might be somewhat tied on this decision. If that makes your siblings mad...I am sorry. You could offer ...to make them a gift of $13K a piece. When you choose to let them know about this, it might be to your advantage to have the lawyer write a letter with an insert of what the law is regarding beneficiary designations....to help take it off of you somewhat.

+1

For sticky situations, delegate any correspondence to your attorney. I had to do this when I was executing my late husband's Will, of which I was the sole Beneficiary except a few direct bequests of some sentimental household items. I was a JTWROS owner on all other accounts.
The cost was low, but the ROI was fabulous because it forced my husband's family to have to debate the terms of his Will with my attorney, not me. What a relief!

 

[MichaelB]

So I called my mothers electric company. I advised them of the situation and asked them to leave the service on but to suspend billing until the will was probated at which time I would pay the bill. They said they had no procedures in place that would make that possible.

Then you need to pay and keep clear records so you can be reimbursed when probate is over.