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Settling an Estate
Old 02-11-2020, 07:33 AM   #1
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Settling an Estate

My dear mother passed away last weekend. She was almost 95. She had developed dementia which progressed pretty rapidly over the past 2.5 years. I feel as though I had been losing her by inches over that time period and much of my grieving had already taken place. It was a blessing in the end, something which I can now admit. She was a lovely mother. I was very fortunate to be raised by she and my Dad who passed 10 ago.

I will meet with an attorney next week but I was hoping to understand the mechanics of the transfer of her assets. She has a checking account that I am a co owner of and a brokerage account in her name, naming me as sole beneficiary. There is a small whole life policy and a small IRA, both naming me as beneficiary. I am an only child and her executor. That's it. Total value is fairly substantial but well below the federal and state thresholds.

So I am wondering what the mechanics will be of transfering the assets. I'm thinking that as I am joint on the checking account, I could write a check at any time to myself and then close the account. As far as the brokerage account is concerned, there will be a step up and 4 of the holdings I want to hold onto. The remainder I want to sell and reinvest in our AA. I'd like to sell those as soon as possible, thus creating no gains or losses. Would I do that before transfer of assets, or after? If before wouldn't that create a seeming tax event for the brokerage account in her name? Also how do bonds held in the account work? There is one individual bond with a maturity date of 9/20. Is there a payable on death component of individual bonds? If so is it payable on demand at par? I think there is appreciation on that bond, over cost, so would I sell it now to capture the appreciation with no capital gain?

Thanks for your input.
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Old 02-11-2020, 07:48 AM   #2
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Sincere condolences on your loss. It's always rough, no matter what.

When I was in the identical situation, I went to my county probate office just in case, but they told me I didn't have to do anything since the total was under their limit.

Get more copies of the death certificate than you think you'll need. They come in handy more often than you might expect.
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Old 02-11-2020, 07:58 AM   #3
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I'm sorry for your loss but I understand your already feeling you have lost her and the blessing in disguise aspect of things.

Since you are joint owner, the checking account, it is yours... you can just write a check to yourself for the balance and deposit it in your personal account, presumably after any of her outstanding bills have been paid.

For the accounts where you are beneficiary, you'll need to notify the financial institution that she has died and provide them with a death certificate. They will then transfer the assets to an account in your name with a stepped up basis and you can do with them as you wish.... they may also offer other alternatives to you... like a check in your name.

On the whole life policy you'll need to notify the insurer of her death and you may need to provide a death certificate and they will issue a check in your name for the death benefit or they may send you a book of drafts (like checks) and you can write yourself a check if you wish to.

The IRA will become an inherited IRA that should be kept separate from your IRA since it will have a separate RMD schedule... again, you'll need to notify the financial institution of her death and provide them with a death certificate.

You'll get a stepped up basis on the bonds so you'll have a gain or loss for any change in value from the date of death.

All of this presumes that you are the sole heir of her will or that she doesn't have a will. From what you wrote, it doesn't sound like probate will be required since there are no assets subject to probate other than perhaps some personal property (furniture, clothing, jewelry, etc) or that at worst it woudl fall under the small estate provisions that many states have.
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Old 02-11-2020, 08:34 AM   #4
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Sorry for your loss.

I was executor for my dear old Dad a few years ago. I went to the county with the will and death certificate, and they stepped me through the process. I called my own estate lawyer and asked if he could help me but he said that I didn't need him so I did it all myself. Things vary by state, though, so make sure you know what's required in your jurisdiction.

I had to deal with an inherited IRA, an inherited taxable brokerage account, and an inherited annuity (all split two ways). That part was easy; the harder part is with dealing with filing the deceased's income taxes, selling the real estate, cleaning out the "stuff," finding all the insurance policies, shutting off the utilities, keeping up with the accounting, filing the accounts with the county (mine demanded things to the penny), selling any assets of value that none of the heirs want, etc. It was a fair amount of work, but I'm glad I did it myself. Not everyone would want to, I admit.

Good luck!
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Old 02-11-2020, 08:47 AM   #5
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My condolences, GS. So, any TOD/POD accounts should pass directly to you outside of probate. As for the checking account, you might as well withdraw the funds and close it. I would recommend also searching for "[your mother's state] probate exemptions", especially if she might have had any significant outstanding debts. NYS is fairly generous in exempting a vehicle and household goods, so the family doesn't have to sell those things to pay debts.

As for the investments, if you tried to sell the assets now, it might be harder to avoid the estate paying capital gains. The step up is as of the date of death, but it would be easier when it is transferred. Maybe check with the brokerage, I know Fido has dedicated staff to helping transfer estate accounts, and they're not only specialized, they are very used to dealing with people in mourning, I found them very thoughtful. I don't think the bonds get any special treatment, but you can of course always sell those at the market rate. I wish I had cashed out and reinvested my father's money in my AA. Instead, since I knew he spent a lot of time on it, I left his money where he had it. It's been more trouble than the rest of my two-fund, set-it-and-forget-it AA.
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Old 02-11-2020, 08:53 AM   #6
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Do you really need to meet with the attorney? With a few death certificates you should be able to handle everything yourself.
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Old 02-11-2020, 08:57 AM   #7
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One caution on closing the bank account too quickly... Make certain none of the investment accounts are set up to transfer interest/dividend deposits into it. Otherwise, those deposits won't have a place to go to. As other's have mentioned, make sure any bills that auto-pay from the account are shut off and finalized. I'd wait a couple months before closing the checking account and monitor it for a while.
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Old 02-11-2020, 09:06 AM   #8
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My condolences to you.
It is good to check in with an estate lawyer. After my last parent passed, most of the estate was closed out fairly easily with one big hiccup around the sale of the house. Once the lawyer was there to guide us, things moved along better.
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Old 02-11-2020, 09:06 AM   #9
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Also sorry for your loss.

In addition to the solid info you have received so far, I didn't see any mention of obtaining an EIN, you need this to re-title accounts, replacing her SSN. It can be dome pretty easily on-line, but as I recall, some of the questions were sort of obtuse, and it was hard to tell if I was providing the response they were looking for, but it seems to have all worked out. If you ask here, I'd bet people can help.

I don't think you can legally sell anything in her brokerage account while it is still titled under her SSN. If no one knows, it probably won't come up, but best to get it retitled, and then make any sales. Pretty sure if you inform the brokerage of the death, they will freeze the account, and only allow transfer to a new account under her EIN (that's what Fidelity did for us).

Probate varies by state. In IL, nothing was needed if personal accounts (outside of trusts) were below $100K. If your state is similar, you might need to get some probate documents (or go through probate) to do anything with the brokerage account if it is over the state limits.

Make sure you an get 2020 tax records for both her accounts pre and post death. We had to jump through some minor hoops to get my MIL's pre-death account tax records. IIRC, it's because they really freeze that old account, so you can't update the mailing address, document delivery options or anything from on-line, it had to be handled manually on their side.

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Old 02-11-2020, 09:11 AM   #10
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Quote:
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Do you really need to meet with the attorney? With a few death certificates you should be able to handle everything yourself.
Gill
Exactly what I was thinking... but the meeting with the atty might be to just get advice on what needs to be done and process rather than having the atty doing those things.
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Old 02-11-2020, 09:11 AM   #11
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Quote:
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Do you really need to meet with the attorney? With a few death certificates you should be able to handle everything yourself.
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My condolences to you.
It is good to check in with an estate lawyer. ....
In our experience, the lawyers only made things more difficult and they charged unscrupulous fees when my FIL passed.

We DIY when MIL passed. Much easier. This isn't rocket science. The NOLO books are a good guide.

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Old 02-11-2020, 09:17 AM   #12
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... I don't think you can legally sell anything in her brokerage account while it is still titled under her SSN. If no one knows, it probably won't come up, but best to get it retitled, and then make any sales. Pretty sure if you inform the brokerage of the death, they will freeze the account, and only allow transfer to a new account under her EIN (that's what Fidelity did for us). ...
Agreed on the first part... also important to get basis stepped up for reporting by the financial institution to the IRS when the assets are sold.

But I don't get the EIN thing. I know I had to get an EIN when my dad died for his trust, but for his IRA it just transferred from his IRA at an inherited IRA with my Mom's SSN.

Why would an EIN be needed if the beneficiary is an individual that already has a SSN that serves as their TIN?
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Old 02-11-2020, 09:36 AM   #13
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Agreed on the first part... also important to get basis stepped up for reporting by the financial institution to the IRS when the assets are sold.

But I don't get the EIN thing. I know I had to get an EIN when my dad died for his trust, but for his IRA it just transferred from his IRA at an inherited IRA with my Mom's SSN.

Why would an EIN be needed if the beneficiary is an individual that already has a SSN that serves as their TIN?
I don't think it would be needed for the IRA (those go direct to named beneficiaries, handled by the administrator of the IRA), but he also mentioned a brokerage account in her name. Maybe with only one beneficiary, it can just be retitled directly? IDK, as that wasn't an option for us, but it might be for the OP?

Maybe someone can chime in on that, or I may look into my NOLO book later.

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Old 02-11-2020, 09:39 AM   #14
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Thank you all. This is really helpful. I am expecting no probate. No debt. No real estate, no other heirs. Estate worth about half a million, so way under federal threshold and state matches federal. I would like to know if I need an EIN, as I hadn't thought of that. No trusts involved. I will keep the checking account open for a bit. Good point that the account is set up for automatic dividend and interest transfer from the brokerage account. I charged the funeral and flowers yesterday on my own credit card so I plan to reimburse myself once the bill comes in at the end of the month.

Seeing that I am the executor, is there any sort of paperwork that names me as Executor or PA, aside from the will itself. I am set to receive a dozen death certificates on Thursday. I have printed out the brokerage assets, cost basis and tax lots, as of date of death.

My DIL's father is an estate attorney and a friend. Mom and Dad's attorney has retired, so I think I'll set up an appointment with him or one of his junior associates and ask for advice on how to do this all myself. It won't hurt and I will have the comfort of knowing if I am missing anything.
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Old 02-11-2020, 09:40 AM   #15
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I'm interested in learning more about this process as my Mom's taxable account at Vanguard has us 5 kids designated as beneficiaries.... I assumed that when Mom passes that Vanguard would just set up an account for each of us with our SSNs and transfer 20% of each position into the aforementioned accounts with a stepped-up basis... and from that point we can hold, sell, trade as we want.
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Old 02-11-2020, 09:41 AM   #16
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Found this on EIN. If I'm reading right, if you are able to distribute the assets before they generate $600 of income, you won't need to file an Estate Return, and won't need an EIN (but that was just a quick read - please correct me if wrong):

https://www.irs.gov/businesses/small...-administrator

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Second, an estate administrator may need to file income tax returns for the estate (Form 1041). To file this return you will need to get a tax identification number for the estate (called an employer identification number or EIN). An estate is required to file an income tax return if assets of the estate generate more than $600 in annual income. For example, if the decedent had interest, dividend or rental income when alive, then after death that income becomes income of the estate and may trigger the requirement to file an estate income tax return. For help filing an income tax return for the estate see Filing the Estate Income Tax Return (Form 1041) page.
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Old 02-11-2020, 09:43 AM   #17
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My sympathies on your loss.

I didn't read all the details in the responses. If she was receiving any SS, pension, or annuity-type payments, they need to be notified to "turn off the tap".

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Old 02-11-2020, 09:48 AM   #18
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Found this on EIN. If I'm reading right, if you are able to distribute the assets before they generate $600 of income, you won't need to file an Estate Return, and won't need an EIN (but that was just a quick read - please correct me if wrong): ...
I can see that for assets that are going through probate.... for example where there are no stated beneficiaries and the assets are going to be settled/distributed through probate.

But if there are designated beneficiaries I would have thought that income up to the date of death would be reported under the decedent's SSN and included in their final tax return and any income subsequent to the date of death would be reported under the beneficiaries' SSNs ..... and since those assets avoid probate they can't be included in the estate's return since they are never assets of the estate.
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Old 02-11-2020, 09:50 AM   #19
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Yep. Funeral director notifies SS, he tells me. There are three SPIA annuities with no residual. My plan is to call the bank, the brokerage, the three annuity companies, the two pensions, the Life Insurance Company and the IRA administratior, once I have the dealth certificates and follow their instructions on what to do next. I've also notified her dental insurer. Do I have to notify Medicare - does anyone know? She has a United Health medicare Advantage Plan. I assume I should notify them as well?
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Old 02-11-2020, 09:53 AM   #20
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I think the funeral director notifying SS take care of Medicare since presumably her Part A premiums were deducted from her SS benefits. You should notify United Healthcare for her MA plan.... though they may get a notification through SS.
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