Inheritance Investments ?'s

Wow, the tax lawyers and investment folks are booked up. I have asked my broker the same ?'s I will ask here as we seem to be in the similar age group and may have experienced the same issue.

Here goes.

My dad passed in December and made me his executor. Besides finding that my dad was not at all as organised as he lead me to believe. He did in fact leave me a lot of money. As in buy a boat money.

His trust instructs me to share some of it with my niece. The only cash will be from the house sale, everything else is in equities. Do I need to sell the stocks to get her percentage paid.

How do I avoid paying taxes on the house money when I deposit the check into my account? I do have an IRS trust number that my lawyer obtained. Should I open a new checking account for dealing with this?

I do have an appointment with an investment person but it is 3 weeks out and the house cash is due here tomorrow.

Thanks in advance.
PS- I just went out and put my 200 Watt block heater onto my Diesel PU.

I'd deposit the money in a new account and not make any distribution before discussing with an attorney or CPA expert in estates. If the niece has a specified percent of the estate, that would include the equities. The equities needn't be cashed, her portion of the shares should be transferred.

Sorry for your loss. How big of a boat are we talking about?

Are you getting the proceeds by check? If so you may want to hold onto it until you speak with a professional, rather than depositing it. With today's interest rates you won't be losing anything.
If you have a niece then there is or was a sibling in the picture. If that sibling has passed then you may be fine, but if not I would just hold onto the paper check for now rather than have a court potentially freeze an account.

You need to get with an estate attorney, ideally the one who set his trust up. You will need a separate account for the inheritance. You'll also need a professional in your state advising you on any taxes or costs. You need to clear things with attorney and accountant before with investment person. There are many complex issues as you have a death, probate, inheritance, trust and on top of that you'll have to file tax returns for him, perhaps 2016 and 2017 assuming 2016 hasn't been filed. Any taxes will have to come from the estate plus any refund would add to the estate.

I don't know how the niece's portion is worded but if it's of the entire estate then you have to know more before calculating it. If it's just of the trust amount then you'll need to document those very carefully.

Inheritances can turn family against family so be sure you have everything documented and all t's crossed and i's dotted with professional advice, not just proceeding on your own.

BigJim said:

His trust instructs me to share some of it with my niece. The only cash will be from the house sale, everything else is in equities. Do I need to sell the stocks to get her percentage paid.

How do I avoid paying taxes on the house money when I deposit the check into my account? I do have an IRS trust number that my lawyer obtained. Should I open a new checking account for dealing with this?

I do have an appointment with an investment person but it is 3 weeks out and the house cash is due here tomorrow.

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When the cash arrives put it into an account that is kept separate from everything else you own and keep EXCELLENT records of every transaction of money in and out of the account. When your niece learns she's part of the trust she may demand a complete accounting of the funds.

By way of an FYI, to help avoid paying any capital gains taxes on the securities you inherited, you can set the value of the investments one of two ways: Either value them as of the date of his death, or 6 months later. Obviously how the investments have appreciated or depreciated since his death will have on how you handle that. It's called an Appreciated Cost Basis and essentially wipes out what could be massive capital gains taxes if he has held the investments a long time.

An example from my own family: My MIL owns a substantial amount of Exxon stock that he late husband bought many, many years ago. They got it long enough ago that about 90% of its value is capital gains, 10% is the actual cost of the stock. If we sold off any of it now we would be exposed to huge capital gain taxes. We have to hold it until after she passes so we can get the Appreciated Cost Basis and avoid the capital gains taxes.

There's no rush to do things so wait the 3 weeks until you can sit with a financial planner.

I think you are nuts for asking such a personal and legal question on this forum. Everything you read here is suspect. How in the world are you going to sort out the conflicting advice you get here? With an attorney is how.

It is one thing to ask for technical opinions here about boats. You can read them and make your best guess which is right and reasonable. The consequences of a wrong decision are rarely significant. But when you are talking about estate issues, logic means nothing- the law means everything.

David

BandB said:

You need to get with [i.e. Consult] an estate attorney, ideally the one who set his trust up.

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Don't do a thing until you do. I was one before my retardment. I have seen the sometime horrendous consequences of not doing so.

No charge.

Indeed

I take everything I read on the Internet with a grain of Salt and skepticism. I do however appreciate what I have read here to date. It has reinforced my current thought process.

Jim

djmarchand said:

I think you are nuts for asking such a personal and legal question on this forum. Everything you read here is suspect. How in the world are you going to sort out the conflicting advice you get here? With an attorney is how.

It is one thing to ask for technical opinions here about boats. You can read them and make your best guess which is right and reasonable. The consequences of a wrong decision are rarely significant. But when you are talking about estate issues, logic means nothing- the law means everything.

David

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Greetings,
Mr. BJ. I am in full agreement with Messrs. dj and dw. Do NOT listen to internet advice AT ALL!!!!! Kind of ironic that you shouldn't listen to this but you should.....You know what I mean.

BigJim said:

How do I avoid paying taxes on the house money when I deposit the check into my account? I do have an IRS trust number that my lawyer obtained. Should I open a new checking account for dealing with this?

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I've handled a couple estates yrs ago and memory is a little shaky but...

I seem to remember the separate acct should be in the estate name w/ the Fed tax # you rec'd. All cash should be deposited and be distributed through this acct.
I enlisted the help of an accountant as I had to file tax returns for the acct / estate.
Per previous comments basis for home & equities is "stepped up" to date of death or other date close so there should be little / no tax due for home sale.
The estate pays the tax due not the receiving parties.

I will concur with the other. Hang on the check or deposit into the trust account and don't spend a dime until you can get the advice from an estate attorney.

I went through this with my father a decade ago. It is confusing for mere mortals.

If everything is in a trust and you are now the trustee you can sell the house and the proceeds stay in the trust deposited to one of the trust's accounts. The trust can distribute the proceeds as directed in its documentation. As far as paying your niece's part to her goes, the trust can transfer stocks and securities to her. She will need her own brokerage account to facilitate that. It is easiest if she sets up an account with the same brokerage the trust uses. Alternatively, the trust can sell stocks and pay her cash. From a capitol gains perspective, it may be better to transfer securities to her so she can sell them. The basis for the securities will step up to the value of the securities either at the date of your dad's death or the date they are transferred out of the trust. One thing is that the trust will owe taxes on any income for the year before it is distributed. You will have to file a return for the trust. You will need a CPA to help with that unless you are pretty knowledgeable about trust taxes.

It may seem complex, but I assure you that dealing with a trust is easier than going through probate. I went through this when my dad died and my brother-in-law and I were the trustees. It didn't seem all that bad perhaps because my brother-in-law is a CPA and my wife is a tax lawyer.

What a great problem to have!
You really should deposit the check into my account, PM me for the number.

kapnd said:

What a great problem to have!
You really should deposit the check into my account, PM me for the number.

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I have some I can give you, so ahead and PM me your bank details.

No sure how it works over there but by the time the Estate starts to distribute it is well and truly being administered, usually by the Executor, who instructs Attorneys to act on his/the Estates behalf for the purpose of administering the Estate.
The Estate funds can comprise the assets, and income thereon during the time from death to distribution. Here, Estates need to lodge tax returns for income on the assets during administration pending distribution. There are special rules here about what we call Capital Gains Tax, and how and when that liability gets triggered with an Estate, there can be quite favorable deferals for beneficiaries. Over there, no idea, but worth asking.
Consulting an "investment person" comes way second to retaining a lawyer. I have a view about consulting "investment persons", but if you want after you get the legalities under way so be it.(Is Bernie Madoff still available?).Estate law and how an Estate is handled is likely to be as straightforward there as here, but just about every case throws up some issue needing the lawyer to get thinking.
So that`s it. Consult the right person. Even if they are busy. They are busy because they are in demand, often because they are good at what they do.

Actually nothing here is ever straight forward including estate law and his situation is complicated by a trust, so an entire additional entity involved in the middle.

Too little information to give any advice on line. Hire a lawyer which is the highest and best use of funds.

Issues you are ignoring. Issue is not your state of residence but your father's. Size of the estate. Unless the estate is in the millions likely no federal tax on the estate or the sale of the house or equities. The stepped up basis (value on date of death) should eliminate most capital gains taxes. Could be a state inheritance tax.

Bay Pelican said:

Too little information to give any advice on line. Hire a lawyer which is the highest and best use of funds.

Issues you are ignoring. Issue is not your state of residence but your father's. Size of the estate. Unless the estate is in the millions likely no federal tax on the estate or the sale of the house or equities. The stepped up basis (value on date of death) should eliminate most capital gains taxes. Could be a state inheritance tax.

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As if that isn't enough, add in assets inside the trust vs. outside, toss in the specific wording on how it's to be split and at what point the niece's portion is determined. Then who is the trustee and who the executor. Debts, likely all outside the trust but some could be inside. Whether or not probate required. Getting ownership of items changed when appropriate. Notices that must be run in newspapers. Then all those things we haven't thought of.

A trust set arrangement is not so unusual a competent lawyer can`t deal with it, but in my humble opinion, B&B and Bay Pelican are giving good advice, namely that you, the OP, need good advice. I`m sure once you do the issues will be clarified, you`ll know where you are heading,and your concerns will ease.
There are lawyers who love handling Estates, they specialize in it. Not my cup of tea, even before I joined the bar. I was glad to have a lawyer recently advise me as executor of an estate. They will know what if any other advice needs to sought. It is possible the trust was set up as part of estate tax planning, that needs to be carried through to ensure any benefits are preserved. A good tax accountant may be helpful.
Frustrating, but estates can take time to be handled properly.

I had a similar situation when my father passed. Not going to comment on anything,except the advice of a separate account, along with good bookkeeping is a good one. I wouldn't spend a dime yet, as I had bills (especially medical) coming in as far out as a year from his death. Make sure you hold a substantial amount in that account, before deciding on dispersals. Good luck, sorry for your loss

I'm sorry for your loss.

Please hire a quality estate attorney before doing anything.

Thanks for all that everyone

When the check arrives I will set up a new account using the trust name and IRS ID #. Then wait for my appt. And I most likely will seek a trust/estate lawyer prior to the investment person.

He has one account in the six figures that is currently paying 2.5% interest compounded daily. So that is free money while I sort this all out.

My parents did not throw anything away. I found WW2 love letters (saved), 63 years worth of anniversary cards, newspaper clippings with notes to himself, every bank, brokerage account he ever had, and my mom's art work. Hus life in the USN was well documented as well.

cardude01 said:

I'm sorry for your loss.

Please hire a quality estate attorney before doing anything.

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BruceK said:

There are lawyers who love handling Estates, they specialize in it. Not my cup of tea, even before I joined the bar. I was glad to have a lawyer recently advise me as executor of an estate. They will know what if any other advice needs to sought. It is possible the trust was set up as part of estate tax planning, that needs to be carried through to ensure any benefits are preserved. A good tax accountant may be helpful.
Frustrating, but estates can take time to be handled properly.

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The best lawyers and accountants know their limits and areas that aren't their expertise either. When we did our estate planning, it was all new to me.

I once interviewed an accountant who made it clear with his first answer, that he was an expert in all areas of accounting. I then proved to him at least half a dozen areas he knew nothing about, but did not hire him. Can't possibly know it all.

That's why we use an attorney in a large firm. Areas that aren't her expertise, they are for someone down the hall.

Too late asking, but if you still can, before opening your mouth about your Dad's death to anyone in or near a bank, transfer everything that is in joint accounts with you into a new account just in your name. Do this in a different bank. Should there end up being any money in accounts in his name alone, you will find the banks freezing those until you can show them Letters Probate, ie making you official as his executor. Until then they will assume you have reservations on the first flight out to the Cayman Islands and your niece will see none of the promised money.
You may think this is flippant or over the top, but, as a lawyer experienced in this area, I know this is how bank personnel are trained to think. In the States, it is likely they would put it in terms of their own liability to your niece, should they let you get away with any of that money. Their first loyalty has to be to their bank, not to you as the customer.
Once you have safely put the funds you can protect, far from the potential traps in the bank, go see that estate professional. There are so many land mines that the unsuspecting can trip over, you need professional help to dodge them.

I wouldn't normally jump on the bandwagon here, as I almost always avoid paying attorneys and CPAs for anything I feel I can figure out on my own, including things like really complicated contracts, real estate transactions, and divorce, but in this case... estate tax attorney is your huckleberry.

Yup. Go through lawyer. Always remember, the government always knows that there is money somewhere and at least ONE of the parties, the trust, or the beneficiary, will be taxed if there are capital gains.

In some situations GOLD works.

A million FERNS (federal reserve notes) worth of paper assets are not many pounds .

No paper currency has survived long term , by design.