Walk me through settling an estate

[MarieIG]

Yep ^ but I'm not a tax person - had an estate tax-attorney CPA/ former IRS agent on speed dial for larger estates.

[Walt34]

Quote:

Originally Posted by Sunset I have a related question about the POD/TOD accounts. I'm wondering does the executor/executrix have full control over disbursement or can it be short circuited. Example: Person dies, has an account with POD/TOD on it with 50% to Person1, and 50% to Person2. Can either of those people simply walk into the bank with a death certificate and get their share before everything is settled, meaning taxes may not even be paid yet ?

State laws vary of course, but in Maryland the executor had full control over those assets going through probate. And only those assets. The ones that are POD/TOD do not go through probate, and any taxes due are the responsibility of the recipient so it is not something that the executor needs to concern themselves with.

[audreyh1]

POD/TOD does bypass the executor.

If the estate is large enough that estate tax is owed, it would be taken out of the remainder of the estate.

[SecondCor521]

Quote:

Originally Posted by Walt34 State laws vary of course, but in Maryland the executor had full control over those assets going through probate. And only those assets. The ones that are POD/TOD do not go through probate, and any taxes due are the responsibility of the recipient so it is not something that the executor needs to concern themselves with.

Quote:

Originally Posted by audreyh1 POD/TOD does bypass the executor. If the estate is large enough that estate tax is owed, it would be taken out of the remainder of the estate.

The above are mostly correct, mostly in the first halves.

Estate taxes are due on the total taxable estate, regardless of which assets are probate assets (disposed of through a will) or non-probate assets (disposed of through POD/TOD/beneficiary).

The estate is responsible for the estate taxes due. Usually the probate assets are enough to pay the bill. In theory you could have an estate tax bill that is greater than the probate estate value ($10M IRA POD niece, household furnishings and a beat up car the only probate assets). In that case, the POD/TOD assets should properly be used to pay the rest of the estate taxes. I don't know how, and it's a rare situation anyway, but I'm sure there must be some provision for claw back of the POD/TOD assets.

Most of the time, of course, this situation doesn't occur, and when it does occur people hopefully do the right thing. But if it did happen and the person taking the POD/TOD assets is an idiot or a jerk, then the executor might need to concern themselves with the situation in some way. And the law and the recipient/idiot/jerk would have to address it somehow as well, either by fleeing to a non-extradition country or coughing up the money.

[MarieIG]

Quote:

Originally Posted by SecondCor521 The above are mostly correct, mostly in the first halves. Estate taxes are due on the total taxable estate, regardless of which assets are probate assets (disposed of through a will) or non-probate assets (disposed of through POD/TOD/beneficiary). The estate is responsible for the estate taxes due. Usually the probate assets are enough to pay the bill. In theory you could have an estate tax bill that is greater than the probate estate value ($10M IRA POD niece, household furnishings and a beat up car the only probate assets). In that case, the POD/TOD assets should properly be used to pay the rest of the estate taxes. I don't know how, and it's a rare situation anyway, but I'm sure there must be some provision for claw back of the POD/TOD assets. Most of the time, of course, this situation doesn't occur, and when it does occur people hopefully do the right thing. But if it did happen and the person taking the POD/TOD assets is an idiot or a jerk, then the executor might need to concern themselves with the situation in some way. And the law and the recipient/idiot/jerk would have to address it somehow as well, either by fleeing to a non-extradition country or coughing up the money.

State law may vary, and it is my understanding state law apportionment (again depending on the venue) may be over ridden by clear provisions in the will. Most of the wills we probated specifically required that taxes due be paid out of the residuary. (Not necessarily the best idea.) My (last) office never did handle estates where there was insufficient funds to pay taxes. As an aside, they tracked down every penny, and yes, they got the info. When monies are paid out to a non-probate beneficiary, there is a paper trail, and they can be tracked down. And, this info was provided to the estate tax attorney, as it is the responsibility of the executor/ administrator to file the returns for the gross taxable estate. I would also assume that when the non-probate beneficiary is paid, that info is turned over by the bank/ brokerage to the IRS (and state if they tax). At this point/ IDK/ can't recall, but I strongly suspect if the taxes were required to be apportioned to include the non-probate beneficiaries, the info as to the non-probate beneficiaries would be reflected on the tax returns. I defer to the tax professionals here.

[retire to nature]

I haven't gone thru all the thread thoroughly, so I will write what I have newly know for the second probate experience in my life.

First one was in CA used the nolo book. +1 I recommend. CA doesn't require to have an atty. My ex filed for his father's death.
Second one was in MO same as you, an executor and solo beneficiary. MO require an atty.

most of ppl covered. I will write ppl would not know. to have a probate or not probate is the asset amount, and it has % of asset for atty fee by state law. But by accident, I met a atty asking for cheap amount. He said my case is so easy since i am the only one there. I thought it was set rate, but he said it is still changeable. Mine was easy but he was not so good atty, but it was my second probate, so I was survived in his mislead. Somebody said, it there is beneficiary on bank account or etc, you can just ask to the bank with death certificate, so in that case, it may be right those asset is not included for the total asset for the %. I saved about $15-20k on atty fee. my asset was about $1.2 mil.

I didnt understand step up basis well at that time. I sold 4 houses during the second probate, and if I understand right now, I would be profit to wait to sell after probate was done. it was a sudden death, so I have too many thing to handle, I wanted to sell those 4. so now my sister tax has to pay the capital gain tax on those house(CPA misinformed about the capital gain tax (or I misspoke as capital tax as the estate tax) she doesnt pay gain part, so I sold it). But now he says I need to pay. So if I inherited first the house at the step up basis and sold, since i need to pay estate tax (which would be zero because up to 11million dollar is zero) and not capital gain much (gain from the death date to sold date).

my second case was w/o will, so it took 8month (3/2020-12/2020 in pandemic time) including 6month debt advertisement required period. mine even could have been shorter since I had ancillary case in IL. your case would be straight forward and short due to you have a will and solo.

[Sunset]

Quote:

Originally Posted by SecondCor521 ...... Most of the time, of course, this situation doesn't occur, and when it does occur people hopefully do the right thing. But if it did happen and the person taking the POD/TOD assets is an idiot or a jerk, then the executor might need to concern themselves with the situation in some way. And the law and the recipient/idiot/jerk would have to address it somehow as well, either by fleeing to a non-extradition country or coughing up the money.

I had to do some searching, and most sites do say it is rare.
However this site said for Iowa , the only real way is to sue the POD/TOD beneficiary and if they are outside the State, it gets more expensive.
https://beattymillerpc.com/wary-tran...eath-accounts/

From this, I conclude it is actually a small possibility a jerk relative could collect all the POD/TOD money and leave the estate unable to pay the needed bills, depending upon the assets and POD/TOD declarations.

[SecondCor521]

Quote:

Originally Posted by Sunset I had to do some searching, and most sites do say it is rare. However this site said for Iowa , the only real way is to sue the POD/TOD beneficiary and if they are outside the State, it gets more expensive. https://beattymillerpc.com/wary-tran...eath-accounts/ From this, I conclude it is actually a small possibility a jerk relative could collect all the POD/TOD money and leave the estate unable to pay the needed bills, depending upon the assets and POD/TOD declarations.

The other thing worth mentioning is that some states have laws that enforce waiting periods on POD/TOD transfers - "Yes, you can have the money but you have to wait 60 days after death" - probably partly to address this concern, rare as it may be. Presumably waiting 60 days to get one's money grubbing hands on Uncle Scrooge's checking account balance is a small price to pay in the interest of public policy.

[Deuce]

Just a thought, a POA is only good as long as the person is alive.

[frances]

In my state (Georgia) the executor of a will is entitled to an amount of money for performing executor duties.
if will fails to mention the executor's commission, Georgia estate law mandates a 2.5% commission of all money brought into the estate and 2.5% percent of all money paid or distributed out of an estate.
https://law.justia.com/codes/georgia...icle-7/53-6-60

might be worth looking in to, as that fee will reduce the total amount in the estate and subsequently reduce the tax burden.

I'm in a similar boat - I'm my mom's sole heir and she had the forethought to put me as joint owner on everything she has save one piece of rental property. She does specify in her will other people who shall receive $x and what the distribution of per personal effects is to be to make things perfectly clear and help me avoid any argument(s) with family. For that I am eternally grateful to her. So when she goes I shouldn't have any issues with closing out her estate rather quickly and quietly.

Hopefully things will go smoothly for OP as well, and condolences in advance for your impending loss.

[ARW44]

When my father passed away in Mich in '91, he had a box of certificates for his stocks and mutual fund shares. His attorney sent me, as sole heir and personal representative, to the local Merrill Lynch office foro them to transfer the shares into a brokerage account set up for me. This was done at no expense or effort on my part.

[RetMD21]

Vanguard took an uploaded scanned copy of the death certificate and transferred assets promptly. Florida has some simplified probate procedures. Link below.


https://www.nolo.com/legal-encyclope...uts-32170.html

[samcat]

I haven't read all the responses but since my husband and I have done three estates, I'll put in my two cents. (He was the trustee/executor but I know how to do the paperwork!).

I'm not sure how Florida works but in California, all three people had trusts. With a trust, you get copies of the death certificate, go to a lawyer who creates a Certification of Trust. Depending on how the trust is set up, a new trust is created (kind of like a survivor trust) and you are the trustee of that trust. The new trust gets a tax ID number and all the assets can be moved into the new trust. You will have to send the death certificate and the Certification of Trust to the firms that hold the accounts who will then let you move the assets into the new trust (or sell them, etc.).

The house would remain in the old trust. It would be sold pretty much just like any other sale (with you as the successor trustee) and then the proceeds would go into the new trust.

With a trust, it is really quite simple. I am on couple forums with you and you seem financially savvy so I think you will be able to handle it pretty easily.

Of course, it was years ago that we did this so things could have changed. If he doesn't have a trust, it might be more difficult and things in Florida could be totally different.

In California, if you don't have a trust, selling a house has to go through probate and the sale has to be approved by a judge. That can take a while.

Re the stock certificates, does he have a brokerage account where he could deposit those now before he dies? That seems easiest to do.

Good luck and I'm sorry you are going to lose someone.

[disneysteve]

Quote:

Originally Posted by RetMD21 Florida has some simplified probate procedures. Link below. https://www.nolo.com/legal-encyclope...uts-32170.html

It looks like that wouldn't apply as there is real estate and the estate is well over 75K. Thanks for the link though.

[disneysteve]

Quote:

Originally Posted by samcat Re the stock certificates, does he have a brokerage account where he could deposit those now before he dies? That seems easiest to do.

I asked him to look into that last week. I'm not sure if he's had a chance and I'm not going to push it if he hasn't. He is dying of cancer after all. If I have to jump through some hoops later, so be it. If he's up to doing it now, it'll save me a little hassle later.

[samcat]

Quote:

Originally Posted by disneysteve I asked him to look into that last week. I'm not sure if he's had a chance and I'm not going to push it if he hasn't. He is dying of cancer after all. If I have to jump through some hoops later, so be it. If he's up to doing it now, it'll save me a little hassle later.

I totally get that. I'm sure if you have the death certificate and proper documents showing you are the heir, it won't be that big of deal.

[jayanu]

OP mentioned that the estate is about $1.2 Million but did not break down the estate in its components.

If there is IRA/Roth IRA involved then one needs to be careful.
Better not to mix your IRA with this inherited IRA. There is a special naming convention for the inherited IRA something to the effect: Inherited IRA/Roth
account of the diseased xyz for the befit of ABC. The financial institution (Fidelity, Vanguard,..) should help.

Also, OP will have to take RMD. The amount and timing of when to start the RMD will vary. HOWEVER, under new law one does NOT have to take RMD and can let it grow for 10 years and at the end of the 10th year, these accounts MUST be emptied. Depending on the OP's tax bracket this can create an additional tax burden. Though no tax burden if it is ROTH.

That is why I converted my IRA to Roth so kids can leave it untouched and let it grow to double the value if the growth is 7% - rule of 72.


Though $1.2 Million may not have to worry about the Federal Estate Tax, there may be a state estate or inheritance tax or both. In PA there is no Estate tax but there is an inheritance tax of 4-4.5% for direct lineage otherwise 15%

[TrvlBug]

Quote:

Originally Posted by samcat ... ... In California, if you don't have a trust, selling a house has to go through probate and the sale has to be approved by a judge. That can take a while.

As of 2016 this changed with CA now allowing TOD beneficiaries on (some) real estate. Was pleasantly surprised with this when I checked into it after MIL passed and had TOD beneficiary designations to her only son on both her homes (Midwest).

[disneysteve]

Quote:

Originally Posted by jayanu If there is IRA/Roth IRA involved then one needs to be careful. Better not to mix your IRA with this inherited IRA. There is a special naming convention for the inherited IRA something to the effect: Inherited IRA/Roth account of the diseased xyz for the befit of ABC. The financial institution (Fidelity, Vanguard,..) should help.

Yes, I am aware of that. And there are IRAs involved.

Quote:

Also, OP will have to take RMD. The amount and timing of when to start the RMD will vary. HOWEVER, under new law one does NOT have to take RMD and can let it grow for 10 years and at the end of the 10th year, these accounts MUST be emptied.

There are actually a couple of exceptions to the 10-year rule and I meet one of them: I am less than 10 years younger than the person leaving me the money. Because of that, I get to draw it down over my life expectancy, not 10 years, so that's very helpful from a tax standpoint.


From Fidelity: Eligible designated beneficiaries include a surviving spouse, a minor child of the deceased owner, disabled or chronically ill individual or any other person who is not more than 10 years younger than the deceased account holder. Eligible designated beneficiaries have the option to take Required Minimum Distributions based on their life expectancy.

[ncbill]

Quote:

Originally Posted by samcat I haven't read all the responses but since my husband and I have done three estates, I'll put in my two cents. (He was the trustee/executor but I know how to do the paperwork!). I'm not sure how Florida works but in California, all three people had trusts. With a trust, you get copies of the death certificate, go to a lawyer who creates a Certification of Trust. Depending on how the trust is set up, a new trust is created (kind of like a survivor trust) and you are the trustee of that trust. The new trust gets a tax ID number and all the assets can be moved into the new trust. You will have to send the death certificate and the Certification of Trust to the firms that hold the accounts who will then let you move the assets into the new trust (or sell them, etc.). The house would remain in the old trust. It would be sold pretty much just like any other sale (with you as the successor trustee) and then the proceeds would go into the new trust. With a trust, it is really quite simple. I am on couple forums with you and you seem financially savvy so I think you will be able to handle it pretty easily. Of course, it was years ago that we did this so things could have changed. If he doesn't have a trust, it might be more difficult and things in Florida could be totally different. In California, if you don't have a trust, selling a house has to go through probate and the sale has to be approved by a judge. That can take a while. Re the stock certificates, does he have a brokerage account where he could deposit those now before he dies? That seems easiest to do. Good luck and I'm sorry you are going to lose someone.

Here with a standard revocable trust all you have to do is get a new tax ID (easily done online) from the IRS when the grantor dies and the trust becomes irrevocable.

The name even stays the same, e.g. "J.R. 'Bob' Dobbs Revocable Trust" keeps the same name even when it becomes irrevocable.