Need some advice on upcoming inheritance currently held at Ameriprise

[Tom52]

My sister and I are meeting with Ameriprise this Friday to discuss/sign paperwork for a low 7 figure inheritance from parents. (I know, I know Ameriprise has a bad rep here, but it is what it is....

So far as I can make out, approx. 40% is in a brokerage account containing stock from 25 different companies (ex. Disney, Home Depot, Walmart, Walgreens, Coca-Cola, etc.) The next biggest holding of approx. 20% of total refers to symbol INTAX but for the life of me I can't find info on this account of the Ameriprise website. The third largest holding, approx. 15% of total I did find on the Amerprise website is a variable annuity RVS RAVA 4 ADVANT NQ. The remaining 25% is spread out over a small IRA ($28K) CDs ($82K), MM (26K), life Ins ($50K), and 5 or 6 smaller annuitites that are still in payout and some have never started a payout (about $185K).

I assume this meeting will end up with both my sister and I eventually walking away with individual Ameriprise accounts with all of the above split between us. We were told in advance that one or two of the smaller annuities may just be cashed out.

I assume there is no other option than to let this process transpire. I will be interested in hearing their suggestions based upon tax liabilities specific to my circumstances. My official last working day is 15 days away, but I will be receiving full pay thru October this year. Starting Nov. 2014 DW and I will be living entirely off of savings/investments and we will also be relying on ACA for health care. I have planned all along to control income to maximize ACA subsidy, but I was not counting on this inheritance in my planning.

Dear sister will have her own issues to consider since she will probably continue to work for many years even though she does not need to. She isn't in the FIRE camp.

Since there is so much experience on this forum, does anyone have any pearls of wisdom for me before our meeting this Friday?

 

[REWahoo]

Since there is so much experience on this forum, does anyone have any pearls of wisdom for me before our meeting this Friday?

No - other than you'll probably want to shower thoroughly right after the meeting concludes.

 

[Htown Harry]

You're in with Ameriprise for at least the time it takes to complete the split into two separate accounts. To maximize your ability to transfer your individual account as a follow-up action, I'd go in with the meeting with the idea that where you want to be in a few weeks is holding a roster of portable stocks and funds. I.e. liquidate the annuities and any other proprietary securities to get your money off on the high management fees.

Once you get a clean statement showing a roster of liquid holdings, you'll have the ability to transfer elsewhere with fewer delays.

 

[Gill]

I would suggest you consider liquidating all the securities and distribute cash to the two of you. You then will be free to invest the proceeds according to your own personal objectives.
Bruce

 

[Tom52]

I would suggest you consider liquidating all the securities and distribute cash to the two of you. You then will be free to invest the proceeds according to your own personal objectives.
Bruce

Good point to consider MBMiner. I am fairly sure Sis would like to liquidate as soon as possible, they do not trust financial advisors either.

I am concerned with the tax consequences of cashing out everything all at once. If I understand correctly the stocks will transfer with no tax liability with cost basis based upon date of transfer. I think life ins. is not taxed, but not sure about everything else, especially the annuities. I am fairly sure some were funded with IRA money but don't know details. A bit afraid of taxes at my 25% marginal tax rate if they are significant.

 

[Tom52]

I just thought of a question that is probably fairly important. Should I set up the account in my name only with DW as beneficiary and DD as secondary, or should it be set up jointly with DW and DD as beneficiary?

Maybe it doesn't make much difference, but there must be a reason to consider the options. Any thoughts?

 

[SteveL]

The only thing I would suggest is that you make sure not to sign anything giving them the right to manage your account for a fee. What your sister does is of course up to her. In the meeting, don't discuss moving your accounts as soon as possible.
Finally, except for the IRA, your tax basis for the balance of the items will be the average price (daily high/low price) on the day your last parent died. You need a paper copy of a list of all assets with the basis for each. The broker should provide this. Put this somewhere safe as you will need to refer to it until the last item inherited has been sold, perhaps many years in the future.

 

[ERD50]

My sister and I are meeting with Ameriprise this Friday to discuss/sign paperwork for a low 7 figure inheritance from parents. (I know, I know Ameriprise has a bad rep here, but it is what it is....

I will be interested in hearing their suggestions based upon tax liabilities specific to my circumstances. ...

If 'their' refers to Ameriprise, I wouldn't ask or listen to any tax or investment suggestions. From what I've read here, their 'answers' will be designed to keep the account with them and maximize your fees.



I think you need to consider professional help, or at least get/start with a decent book like "The Executors Guide" from NOLO. I just glanced at my copy, and there were a fair number of conditions, some State dependent, probate dependent, dependent on how the assets are held, etc.

It's probably not rocket science, but it does appear to require some study, checking, double checking, and careful attention to local and Fed laws.

Condolences on the loss of your parents.

-ERD50

 

[jerome len]

In most cases you would be smart to liquidate and turn everything to cash. If the annuities were started years, ago, they may be based on high interest rates making them worth keeping. I agree with most advice from above; 1. don't agree to any management fees looking to the future. 2. look at the expenses of maintaining the current mutural funds or investments. 3. try to hire a independent financial planner that works by the hour. 4. Simplify and move everything into a age based financial plan that uses low cost index funds. Finally, if you would want your DW to have these funds if something happens to you, put them jointly in both names now. This will save setting up a trust or haveing them probated through a will. Good Luck!

 

[Tom52]

In most cases you would be smart to liquidate and turn everything to cash. If the annuities were started years, ago, they may be based on high interest rates making them worth keeping. I agree with most advice from above; 1. don't agree to any management fees looking to the future. 2. look at the expenses of maintaining the current mutural funds or investments. 3. try to hire a independent financial planner that works by the hour. 4. Simplify and move everything into a age based financial plan that uses low cost index funds. Finally, if you would want your DW to have these funds if something happens to you, put them jointly in both names now. This will save setting up a trust or haveing them probated through a will. Good Luck!

Thanks jerome len for your input. I agree that if cashed out the re-investment should be considered based upon the AA of my current investments not what DD had set up for himself.

The transfer of these accounts from my Dad to us does not go thru probate. The assigned beneficiary gets the funds regardless of what his will says, just need to show up with death certificate in hand and sign paperwork and decide what to do with the proceeds. Yes, it may lock up the account for a couple of weeks but there are no worries that DW would be strapped for money in the interim. Other than that are there any disadvantages to joint ownership?

 

[MRG]

Tom52,

My condolences on your family's loss.

A consideration is what state your parents lived in when they passed. We just learned that per DF's TOD designation the funds got transferred to his heirs accounts and promptly locked. Sister is executor, the attorney she hired said his part would take a week or so, he's let her know this state (PA), generally takes several months to process the inheritance tax.
MRG

 

[Tom52]

Tom52,

My condolences on your family's loss.

A consideration is what state your parents lived in when they passed. We just learned that per DF's TOD designation the funds got transferred to his heirs accounts and promptly locked. Sister is executor, the attorney she hired said his part would take a week or so, he's let her know this state (PA), generally takes several months to process the inheritance tax.
MRG

Thank you and others for your condolences.

Their state of residence was Iowa. It was spelled out to us some time ago the process for the transfer of these accounts. The account is currently locked as of the date of my Dad's passing, but all that is required is a death certificate, (currently in process) and whatever paperwork is required for signing. I don't doubt there will be a few weeks or maybe even a few months delay during processing, but there is no lawyer necessary and no probate issue, at least that what Ameriprise has assured us is the case. I assumed there would be tax consequences.

I believe, the taxes due may likely depend on what decisions we make concerning the proceeds. I am not all that anxious to rush my decision and cash in all my chips unless I have an idea of the tax consequences of each option. I assume that decision could be put off for 1, 3, 6 months whatever without any serious issues. I am only speculating here....

My more pressing issue will be to get Dad's house ready for sale. I live 250 miles away and Sis live 180 miles away so that isn't going to be easy. Especially difficult this time of year with all the nasty weather we are having. What to do with all the "stuff" will be a challenge. Until we sell it we will be paying the bills. I am sure the house will have to go thru the legal system. Dad had a will and Sis and I are both named beneficiaries. Probably will be straight forward, but it will likely take time before we can take ownership and get it on the market. This is all new to us.

 

[MileKing]

For any monies in an IRA, you may want to have the assets moved into an inherited IRA account so you can take advantage of paying out MRDs over your lifetime. Otherwise, I believe you have to distribute the money over 5 years. May not be an issue if the IRA balance is fairly low.

You might want to do a quick read at this link for an overview of considerations that may apply to your situation:

http://www.forbes.com/forbes/2010/0...ra-beneficiary-five-rules-inherited-iras.html

 

[gcgang]

My sister and I are meeting with Ameriprise this Friday to discuss/sign paperwork for a low 7 figure inheritance from parents. (I know, I know Ameriprise has a bad rep here, but it is what it is....

So far as I can make out, approx. 40% is in a brokerage account containing stock from 25 different companies (ex. Disney, Home Depot, Walmart, Walgreens, Coca-Cola, etc.) The next biggest holding of approx. 20% of total refers to symbol INTAX but for the life of me I can't find info on this account of the Ameriprise website. The third largest holding, approx. 15% of total I did find on the Amerprise website is a variable annuity RVS RAVA 4 ADVANT NQ. The remaining 25% is spread out over a small IRA ($28K) CDs ($82K), MM (26K), life Ins ($50K), and 5 or 6 smaller annuitites that are still in payout and some have never started a payout (about $185K).

I assume this meeting will end up with both my sister and I eventually walking away with individual Ameriprise accounts with all of the above split between us. We were told in advance that one or two of the smaller annuities may just be cashed out.

I assume there is no other option than to let this process transpire. I will be interested in hearing their suggestions based upon tax liabilities specific to my circumstances. My official last working day is 15 days away, but I will be receiving full pay thru October this year. Starting Nov. 2014 DW and I will be living entirely off of savings/investments and we will also be relying on ACA for health care. I have planned all along to control income to maximize ACA subsidy, but I was not counting on this inheritance in my planning.

Dear sister will have her own issues to consider since she will probably continue to work for many years even though she does not need to. She isn't in the FIRE camp.

Since there is so much experience on this forum, does anyone have any pearls of wisdom for me before our meeting this Friday?

If this was owned in your parents name, not an irrevocable trust, you will not have any tax liability on the stocks. As mentioned before, your cost basis will be related to the date of death (unless you use the 6 month later date for the estate). I wouldn't be in a rush to sell those. You may want to hold them if they are well diversified and fit with your objectives, or you may want to wait to sell until you transfer to a lower cost broker than Ameriprise.

The annuities will most likely not be able to be continued by you at the rates on the original policy. There may be significant tax liabilities involved. There won't be much you can do about it, perhaps choosing a five year payout being the least harmful to current taxes. As your income will drop next year, see if there is any way to defer the income on the annuities til then if that would help. Don't let them roll you into another annuity.

The life insurance is not taxable income, nor are the other items listed with the exception of the IRA. You could defer the IRA, setting up a beneficiary IRA and taking RMDs, but for such a small amount, may not be worth the bother.

Yes, I think the result of the meeting should be having accounts set up to hold the divided assets. I wouldn't go further than that, however, not signing any investment management agreements. Just tell the rep that you need time to digest all this (you do). After a while, you will figure it out.

 

[meierlde]

Thank you and others for your condolences.

Their state of residence was Iowa. It was spelled out to us some time ago the process for the transfer of these accounts. The account is currently locked as of the date of my Dad's passing, but all that is required is a death certificate, (currently in process) and whatever paperwork is required for signing. I don't doubt there will be a few weeks or maybe even a few months delay during processing, but there is no lawyer necessary and no probate issue, at least that what Ameriprise has assured us is the case. I assumed there would be tax consequences.

I believe, the taxes due may likely depend on what decisions we make concerning the proceeds. I am not all that anxious to rush my decision and cash in all my chips unless I have an idea of the tax consequences of each option. I assume that decision could be put off for 1, 3, 6 months whatever without any serious issues. I am only speculating here....

My more pressing issue will be to get Dad's house ready for sale. I live 250 miles away and Sis live 180 miles away so that isn't going to be easy. Especially difficult this time of year with all the nasty weather we are having. What to do with all the "stuff" will be a challenge. Until we sell it we will be paying the bills. I am sure the house will have to go thru the legal system. Dad had a will and Sis and I are both named beneficiaries. Probably will be straight forward, but it will likely take time before we can take ownership and get it on the market. This is all new to us.

Given the distance and effort involved, you and you sister could go thru the house and pick the moveables you want and take them away. Then call in an estate sale company to do the rest. It will cost some percentage of the proceeds but its a lot less effort involved. This can't take place until probate is opened. Have the executor sell the house, don't wait until probate closes. (In general it will make things simpler).

 

[Tom52]

Given the distance and effort involved, you and you sister could go thru the house and pick the moveables you want and take them away. Then call in an estate sale company to do the rest. It will cost some percentage of the proceeds but its a lot less effort involved. This can't take place until probate is opened. Have the executor sell the house, don't wait until probate closes. (In general it will make things simpler).

Thanks meierlde, my sister and I are co-executors according to the will but unfortunately, neither have any experience with this. If I understand what you are saying, it is not necessary to transfer title of the house into our names before it sells? As executors, once probate is opened we can sell the house transferring title directly from estate to a new owner? Sorry if this is a dumb question. This is all hitting us within the last few days.

We will of course have to consult the lawyer on the necessary steps to get the process going.

We are only in a rush with the Ameriprise accounts so we can get the life insurance money to cover the funeral expenses and monthly expenses on Dad's house. We will be needing about $20K over the next couple of months or else we will need to dip into our own saving. No big deal, it would just be easier to set up a joint checking acct with the life ins. money to cover costs until all is settled. After that most of the immediate pressure will be off.

 

[powerplay]

Having the death certificate(s) will be key to having the Ameriprise accounts broken into two accounts for you and your sister. A recent experience I had with claiming a small life insurance policy involved waiting for the death certificate (about 3 weeks) and then filling out and sending in the insurance companies claim form. It was about 3 weeks after that when I received the check so 6 weeks total.

Good luck on your meeting with Ameriprise. I'm sure you will have to sign some papers to set up an account in your name just be careful that it does not give them the authority to manage the account. My recent experience with the loss of a family member also involved an IRA that was split 3 ways. After the death I lost the right to do anything with the IRA as I previously had authority to make changes and establish withdrawals as necessary. Individual IRA accounts were established by the E Jones person. It took some time and all the holdings were just divided and nothing sold. I chose to roll my inherited IRA over to Vanguard. It took quite awhile and finally a paper check was mailed to Vanguard.

Sorry for your loss and I hope you and your sister work your way through the estate settlement process without any problems.

 

[meierlde]

Thanks meierlde, my sister and I are co-executors according to the will but unfortunately, neither have any experience with this. If I understand what you are saying, it is not necessary to transfer title of the house into our names before it sells? As executors, once probate is opened we can sell the house transferring title directly from estate to a new owner? Sorry if this is a dumb question. This is all hitting us within the last few days.

We will of course have to consult the lawyer on the necessary steps to get the process going.

We are only in a rush with the Ameriprise accounts so we can get the life insurance money to cover the funeral expenses and monthly expenses on Dad's house. We will be needing about $20K over the next couple of months or else we will need to dip into our own saving. No big deal, it would just be easier to set up a joint checking acct with the life ins. money to cover costs until all is settled. After that most of the immediate pressure will be off.

Depending on the state it may take court approval, but in general yes an estate can sell property unless the will specifically does not give that power to the executor. But in general an executor can sell real estate and depending on the state may or may not. Generally the bar would be if the real estate was specifically called out as a bequest in the will.

Of course to be sure you probably should contact an attorney in the community your dad lived in. (The one that drafted the will if still in practice) He can tell you the proceedure you as executor would need to follow to sell the house during the probate process, and might be able to suggest a local estate sale house to sell the property and the stuff inside you and your sister don't want.

 

[Htown Harry]

Good luck today, Tom 52.

Remember, it was your parents that signed up for a $10,000 - $20,000 a year in management fees (assuming 1% of the total value plus the individual fund or annuity costs). You don't have to sign a contract to do the same.

The Ameriprise rep's financial interest is for you to stay put and to pay similar fees. Take any advice he gives with a grain of salt if it could be affected by that incentive.

 

[ziggy29]

I chose to roll my inherited IRA over to Vanguard.

Wow. It took 17 posts in an Ameriprise thread before someone mentioned the V-word. That's gotta be a new record!

Back to the topic, these things can take time to sort out, but yeah, get out at the first possible chance once all the estate matters have been resolved and each heir has their own portion in their own account.

 

[FinanceDude]

So far as I can make out, approx. 40% is in a brokerage account containing stock from 25 different companies (ex. Disney, Home Depot, Walmart, Walgreens, Coca-Cola, etc.)

Sounds like a bunch of blue chip holdings. You get a "run-up in cost basis" when the account owner dies, so very little tax liability to you and your sister. I would keep the stocks and not sell right now, unless these are stocks you don't want to own. If they are in a fee account at Ameriprise, you should be able to sell them without paying individual stick trade commissions, but be sure to ask. It is very easy to transfer a bunch of stocks (in-kind transfer) from Amerprise to somewhere else. I would not suggest Vanguard, their broker dealer area is not low cost. I would consider Schwab or TD Ameritrade for holding that.

The next biggest holding of approx. 20% of total refers to symbol INTAX but for the life of me I can't find info on this account of the Ameriprise website.

Based on a little digging I found, it looks like a Columbia fund, AMT-Free Tax Exempt Bond Fund A. You should be able to liquidate without any fees.

The third largest holding, approx. 15% of total I did find on the Amerprise website is a variable annuity RVS RAVA 4 ADVANT NQ. The remaining 25% is spread out over a small IRA ($28K) CDs ($82K), MM (26K), life Ins ($50K), and 5 or 6 smaller annuitites that are still in payout and some have never started a payout (about $185K).

This is quite a mish-mash of stuff. Get as much info as you can about them and check with a CPA to see how liquidating them would affect your taxes. You could cash out the annuities, but see if there are other options, like continuing the contracts rather that a 5 year payout of the balances. Never hurts to ask.

Sorry for your loss. Take your time, and don't listen to any sales pitches about all the "great ideas" they have for you. You might need to help educate your sister a little............but she may stay with them as you hinted at...........best of luck........

 

[Tom52]

After meeting with Ameriprise

I truly appreciate all of the advice provided. After the meeting with the Ameriprise rep. I feel I have a bit more knowledge, (no paperwork was signed). It appears there is over $200K ($100K for me), that would have to be taxed at my current highest tax bracket if I were to just cash out all the annuities and IRA money.

I have some time to evaulate the options to determine what will work best for my situation. My initial thoughts are to:
A. Keep all of the stocks as is. I can take my time and later determine if there are any changes needed. My equity position is a bit to low in my current AA already so this will bring it more in line where I would like to be going forward.
B. Any cash not subject to taxes (life ins., MM, CDs when maturing end of this year) I would probably invest in Vanguard Wellington or similar.
C. The value of current annuities that are subject to federal taxes and the IRA money, (approx $100K), causes me the most concern. As I mentioned in my original post I am retiring end of February this year but my income will be fairly high for 2014. For 2015 I will have no W2 earnings, only about $12,000 in 1099 income. This would be the case for the next 5 years until SS at 66 discounting any inheritance. Due to need for health care coverage thru ACA my plan was to control MAGI via Roth IRA conversions during this 5 year period. I may have to revise this plan by taking payouts of the untaxed annuity money over this 5 year period to control MAGI and still qualify for ACA subsidy. Unfortunately, that would greatly reduce my TIRA to Roth IRA conversions. I guess there is always the possibility to delay SS a few more years.

I would appreciate your comments if you think there are any fatal flaws in my initial thoughts.

 

[tulak]

I don't understand why you have to cash out your IRA. Can't you roll it over to Vanguard? In that case, you would pay $0 in taxes.

Keep in mind you might pay fees by selling funds in the IRA. This would be the only question I'd try to determine at Amerprise: how much will I pay in fees if I transfer my IRA elsewhere. I'm also not convinced you'll get a straight answer from your FA.

If you do this, I would initiate the transfer from Vanguard. Tell Vanguard you want to rollover an IRA and they will handle the details.

I might be off, but if your FA at Amerprise told you the only option is to cash out your IRA, well, that's outright sleazy. A major scare tactic to make you think you'll have to pay a high % of your investments to leave them.

I can't answer your question regarding the VA, since I know nothing about this product.

It just occurred to me that one could setup a nice (small) business helping people leave Amerprise. One time flat fee for consultation. Heck, I'd almost think it would be a fun volunteer gig during retirement.

 

[haha]

Unless there is very little money involved, put off this meeting until you can confer with a competent attorney. Ameriprise has no standing to tell you how things should be done, and their only interest is in their interests.

If you both want to liquidate, also IMO an excellent idea, likely your attorney can do this for you. You will of course have to part with a bit of money to hire the attorney to do this.

Ha

 

[rodi]

The money that's in the IRA. Assuming your parents were over 70.5, then rolling it to a beneficiary IRA would involve RMD's for each year based on your age, and your parents age. If you google beneficiary rmd calculator you can get an idea of what the RMDs would be.

This could, indeed, impact your plans on keeping your taxable income low to qualify for ACA subsidies. You'll need to do the math to see if the subsidies are worth more than just paying the tax hit this year - in an already high tax rate year for you. Sounds like it's time to do the math or hire an accountant to figure out your best strategy.

I have a beneficiary IRA and take annual RMDs. It's part of my ER plan. I definitely have been modeling how the RMDs are going to impact the various tax situations going forward. But overall doing annual RMDs has worked out well for me. (But I'm still working.)