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How should this inheritance be handled?
Old 03-11-2023, 05:45 PM   #1
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How should this inheritance be handled?

I'm curious to hear your thoughts.


A family member, let's call her A, recently died. She and her husband, E, divorced years ago but continued to live together as a couple until her death (long story irrelevant to the topic). Everyone considered them husband and wife even though they were no longer legally married.


A didn't have a will and had never set up any of her financial accounts to be paid to E upon her death. As a result, her mother, M, is considered under the law to be her next of kin and inherits her funds. All of us, including M, agree that the money rightfully belongs to E.


The question became how to have M transfer the money to E with no tax implications. I do not know how much money is involved but let's assume it at least exceeds the annual gift tax exemption.


What M's financial advisor suggested is for her to open a joint checking account with E but hand over the checkbook and debit card to him so that he has full access to the funds. Her name will be on the account but it will effectively be his money.


None of us really like this method because we feel it should be solely in E's name so that there's no possible way M can screw with it.


1. Is it okay to do it this way?
2. If they do, is there any reason E can't then turn around and withdraw the money and close the account and open a solo account in his name only?
3. Is there some better way this should be handled?
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Old 03-11-2023, 05:54 PM   #2
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I wouldn't touch it.

They weren't married. She could have made a will or left him as a beneficiary, but she did neither.

I don't get the comment about M being able to screw with the money, she is the legitimate heir.

If M "disclaims" there would be a state procedure as to whom would be next in line and it wouldn't be E. As far as taxes, M can give E a yearly gift if she so chooses; and put E in her will, if she so chooses.
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Old 03-11-2023, 06:16 PM   #3
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Keep in mind that the annual gift tax limit only is a requirement to file a gift tax return. It does not require you to pay tax. It’s a record keeping requirement. You don’t get taxed on gifts until they exceed around $12 million. Consult with a tax astute lawyer and I think you’ll find that M can just give the money to E. Of course if M has an estate of over $12M then gift tax may come into play, but if there isn’t millions of dollars in play, gifting it may be the easiest thing to do. Consult an attorney.

ETA: M needs a new financial advisor. A joint account is a ridiculous idea, bordering on negligence. Her name on E’s account could put M’s other assets at risk.
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Old 03-11-2023, 06:17 PM   #4
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Is there some reason M can't give him all the money and simply file a Gift Tax Form 709 with the IRS? Just because you have to file the form doesn't mean any taxes are due.


ETA: Looks like Jerry1 beat me to the punch
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Old 03-11-2023, 06:24 PM   #5
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Is there some reason M can't give him all the money and simply file a Gift Tax Form 709 with the IRS? Just because you have to file the form doesn't mean any taxes are due.


ETA: Looks like Jerry1 beat me to the punch
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Old 03-11-2023, 06:51 PM   #6
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M needs a new financial advisor.
I said that years ago when she first told us something that her advisor had done. He's a moron, like most of them. Certainly a competent advisor should have some working knowledge of estate issues.


I agree with all of you that she should just gift him the money and file the return. That was my answer, but I would never try to explain that to her as she is not the sort to be bothered with facts and reality so she is going with the advisor's recommended course of action, as she has for years with her own portfolio, which I have no doubt has cost her tens of thousands of dollars in fees and under-performance over the past 25-30 years.


So let's assume the joint account does get established. Then what? Can E just draw it out? Maybe not all at once but over the coming year perhaps.
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Old 03-11-2023, 06:52 PM   #7
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I don't get the comment about M being able to screw with the money, she is the legitimate heir.
Being the legal heir and actually being entitled to the money are two different things. As I said, we - including M - agree that this money belongs to E. Had there been a will or beneficiary or TOD, it all would have gone to him.
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Old 03-11-2023, 06:54 PM   #8
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Once a joint account is established either party can draw it all out. After all, it's their account.
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Old 03-11-2023, 06:57 PM   #9
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Once a joint account is established either party can draw it all out. After all, it's their account.
That's what I thought. So even though this wasn't really the ideal way to handle it, as long as M keeps her fingers out of the pot, it works to give E control of the funds.
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Old 03-11-2023, 07:11 PM   #10
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That's what I thought. So even though this wasn't really the ideal way to handle it, as long as M keeps her fingers out of the pot, it works to give E control of the funds.
1st - How is that any different than giving the money to E?

2nd - As long as they share an account, there is the potential that, in the event of E doing something negligent, that Mís other money could be attached. Maybe a long shot, but it would still involve a lot of stress and legal bills.

3rd - If I did set up a joint account, I would want E to empty it and jointly close it as soon as possible. Of course that gets us back to the first point - this is a gift.
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Old 03-11-2023, 07:14 PM   #11
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Itís not the right wayÖ

Day after account is open, E can write a check or transfer it all into his own account then m & E can close account

Then thereís no worry about whoís doing what any more

Itís not a good thing for two people to have the account this way - as one of them could accidentally overdraw account and cause issues for both, etc. other liabilities can also cause problems - if one has an issue and this is technically an asset, etc
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Old 03-11-2023, 07:32 PM   #12
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Originally Posted by disneysteve View Post
That's what I thought. So even though this wasn't really the ideal way to handle it, as long as M keeps her fingers out of the pot, it works to give E control of the funds.

You are probably too close to it but do you realize how out of touch this post is...you're worried about M keeping her fingers out of the pot. First of all, it's legally absolutely M's money, No ifs ands or buts ,its her money. Second you say she is offering the money to E of her own free will. So which is it? Are you and some family members who agree E should get the money pressuring M? After all it's really none of your business. Your use of the royal WE makes me wonder. Why on earth would you be concerned about M keeping her fingers out of the pot. That makes no sense .


Actually in your first post you specifically mention not wanting any possible way for M "to screw" with this money which is actually her money. You do you but I personally wouldn't touch this situation with a 10 foot pole.
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Old 03-12-2023, 05:55 AM   #13
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Being the legal heir and actually being entitled to the money are two different things.
Not in the eyes of the law.
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Old 03-12-2023, 06:30 AM   #14
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Not in the eyes of the law.
I totally understand that. The question is the best way for her to transfer the money to him which is the intent here.
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Old 03-12-2023, 08:51 AM   #15
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If M will not exceed the estate tax trigger, both federal and state when she passes, then she can give simply write a check, transfer, etc, to E. She will have to report it. As I understand it, no taxes are due to either party. If you can keep the amounts under 17,000 per year(2023) / per owner plus their spouses / per recipient, reporting is not required.

As an aside, DW's sister was put as joint owner on their mother's bank account so she could write checks on the mother's behalf. When the mother died, due to some mistakes made in a property sale, there was mid-6 figures in that account. To prevent DW's sister's husband from owning the account in the event that she passed, her sister put DW as joint owner on that account. the 2 were co executors of the mother's estate. They distributed that account to the "proper" beneficiaries (those written in both the Will and the Trust) over the course of two calendar years managing to keep the annual amounts under the reporting limits.

In our case, assuming it was done in 2023, 2 owners and their 2 spouses could gift up to $68,000 each year to a single person this year with no reporting requirement or $136,000 to a married couple.
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Old 03-12-2023, 09:58 AM   #16
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I totally understand that. The question is the best way for her to transfer the money to him which is the intent here.

I don't think you do understand. If one person in this group that's related to M doesn't like the way this is going and wants to make a legal stink about her "giving" her money to E they can make all kinds of issues. Including undue influence, ie pressure from other people and those people could be in a jam. I would have bowed out of this yesterday.



This entire mess is on the married, divorced , living together, didn't bother with taking care of their money couple.



To be absolutely clear Steve I don't know if you or anybody else is pushing M to make it right but the appearance of impropriety is enough to cause untold problems. Whatever you do here do not take the lead....be careful for your own sake...
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Old 03-12-2023, 11:39 AM   #17
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How is this hard? M receives the money and gives it to E. If the amount requires a gift tax return, file the return. No tax is due.

If there is any chance that M's estate will be subject to estate taxes down the road, split the money over two or more years to keep it below the amount where a report must be filed.

I don't see any risk of perceived "impropriety." It's M's money, she can do what she likes with it just as she can do what she likes with any other money she may have.

If M can't be trusted to transfer what she herself agrees is E's money, then you have other problems besides the mechanics of a transfer.
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Old 03-12-2023, 11:58 AM   #18
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The complication is what M's advisor is telling her, to open the joint account. I think there is universal agreement here this is bad advice, but OP does not have the authority to make the right thing happen. I think the OP is just looking for reasons to convince M not to do this. And some are telling the OP to just stay out of it.

That is how this is hard.
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Old 03-12-2023, 12:18 PM   #19
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The complication is what M's advisor is telling her, to open the joint account. I think there is universal agreement here this is bad advice, but OP does not have the authority to make the right thing happen. I think the OP is just looking for reasons to convince M not to do this. And some are telling the OP to just stay out of it.

That is how this is hard.
RB it is a bad idea and one has to wonder if it actually came from the financial advisor. I assume if and when M met with the advisor it was private..maybe M wants to do it this way couple this the comments about worrying with M screwing with the money and red flags are just a flying
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Old 03-12-2023, 01:38 PM   #20
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Depending on hom many figures are involved, you'd want to mitigate the risk in all of this.

Something that persists is that A did not include E as a beneficiary on any account(s).

If E is involved in anything shady, this transfer of money could come back to bite M in a majorly way.
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