Author Topic: Death of a parent / Advice on what to do  (Read 9153 times)

Spork

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Death of a parent / Advice on what to do
« on: March 14, 2016, 05:03:45 PM »
This is going to ramble a lot.  My brain is not fully functioning at the moment.

My dad died last week after a very long hospital stay.  Mom died a couple of years before him.  That means I (and my siblings) will need to start the task of closing up his estate and his business. 

I think he had good estate planning.  And the executor is a very trustworthy sibling.  But any kernels of advice would be appreciated.

The business is a sole proprietorship with one other employee.  He has a trusted CPA that's managed the books for at least 40 years that will be giving us advice.  The one employee will get a generous severance and will help us with any shutdown activities.

We have a very large house full of a ton of crap to deal with -- to sift out what is a memory for someone and dispose of the rest.  There is more "stuff" there than anyone in the family needs and I assume we'll eventually hire out or self manage some sort of estate sale.

A good portion of the estate lies in an IRA that will be inherited by a small number of people.  It has clear beneficiaries listed and will pass directly with no probate.  Any advice on inherited IRAs is appreciated.  He's already been taking RMDs annually as required and I vaguely know I will have to continue. I knew enough to know there were special rules revolving around whether Dad had taken RMDs this  year and, when he moved to hospice, we consulted his CPA who recommended Dad "take" his RMD immediately.  (It basically just moved from one account to another inside his estate.  No one has touched it.  It will be settled with the estate.)

I see some language that says "If multiple beneficiaries, separate accounts must be established by 12/31 of the year following the year of death; otherwise, distributions will be based on the oldest beneficiary."  Does that mean if just one of the beneficiaries doesn't get things done (or does something stupid like taking a lump sum) ... that we all get hit?

If it matters for the advice: I am already FIRE on my own.  The inheritance was always known about, but was always left out of my FIRE planning as if it would never happen.  I don't know the exact amount of inheritance, but it will be significant.  I don't know what I will do with it and think that is a first world problem that will be best dealt with after a significant amount of water has passed under the bridge. 

Any advice on taxes, dealing with inherited IRAs... dealing with closing businesses or large established homes is appreciated.  I'd also like to keep my own income structured to minimize taxes and keep MAGI low.  But these are truly first world issues -- not my primary concerns.

There are also likely to be odd family dynamics as we progress.  I know the will was changed several years back that will likely surprise some with money they were not expecting and others with less money than they expected.  This is likely to cause a big upheaval and cause (minimally) emotional issues -- possibly legal issues.  I don't think any contesting of the will will "win"... but it is a possibility.

onlykelsey

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Re: Death of a parent / Advice on what to do
« Reply #1 on: March 14, 2016, 05:21:41 PM »
I'm sorry for your loss.

It sounds like things are under control from a legal and financial perspective (and, at any rate, I'm not an expert in that). 

But I did become the de facto of my mother's estate at 17, and my advice based on that would be: make sure that to the extent possible, you don't make any big decisions regarding his belongings and your inheritance.  I think people's preferences change very quickly in the aftermath of a death.

Does any sibling have any interest in taking over the business?

Capsu78

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Re: Death of a parent / Advice on what to do
« Reply #2 on: March 14, 2016, 05:41:40 PM »
Don't make big decisions ( that don't have to be made) for at least 6 months.  Prepare yourself that the "closing of the estate" will have a timeline maybe 2 years (tax seasons) long.

Tuskalusa

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Re: Death of a parent / Advice on what to do
« Reply #3 on: March 14, 2016, 05:48:25 PM »
I'm sorry to hear about your dad. I wish I had something witty to say... Been there.  Bought the t-shirt.

For the inherited IRA, I would suggest contacting the brokerage company where the IRA is located. Vanguard has an excellent IRA transition team. Perhaps it's the same for others.

Take care.

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Re: Death of a parent / Advice on what to do
« Reply #4 on: March 14, 2016, 05:50:15 PM »
Sorry for your loss. Random suggestion, but I found the book "The life changing magic of tidying up" to be useful when deciding what to keep while sifting through innumerable inherited objects.

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Re: Death of a parent / Advice on what to do
« Reply #5 on: March 14, 2016, 06:23:51 PM »
Very sorry for your loss.

Is the house paid off? Do you or any of your siblings or other family members live near it? Is anyone/will anyone else be living there? Unless there's a huge rush to empty the house for some reason, I'd recommend letting that sit for a bit until everyone's had a chance to catch their breaths.

Tuskalusa is quite right about contacting the administrator of the IRA. It will need to be divided among the beneficiaries by 12/31/2017, so you do have some time to get it sorted. Make sure each beneficiary understands that they *will* have to start taking annual RMDs, no matter how old or young they are (each beneficiary's RMD will be calculated based on their own age, not your father's age). The IRA administrator can explain all that--it can get complicated.

I've been where you are twice, once for each parent, and I know the feeling of "Oh gawd it's over now the house and the business and the money and AAAAAAAHHHHHHHH I don't want to think about any of it," which is why I'm advising you to stop and rest. Wait for the death certificates to arrive (I hope you ordered a lot--everyone's going to want one), wait for the CPA's advice. Rest, sleep, eat, grieve. It will all get sorted out eventually.

seattlecyclone

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Re: Death of a parent / Advice on what to do
« Reply #6 on: March 14, 2016, 06:34:09 PM »
Sorry for your loss.

As far as the IRA is concerned, the miscellaneous rules for required minimum distributions do back up what you had heard about establishing separate accounts. You have until the end of the year after your father's death to split the IRA into a separate account for each beneficiary. I think this is probably a good idea for a variety of reasons, the biggest of which is that it gives you and your siblings (or other beneficiaries) the freedom to invest your share of the money according to your own wishes, and withdraw the money at your own pace. The fact that the required minimum distributions will be a bit smaller (for all but the oldest) is a small added bonus on top of this.

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Re: Death of a parent / Advice on what to do
« Reply #7 on: March 14, 2016, 06:54:49 PM »
Sorry for you loss. I hope the family will all be well behaved during the settlement of the estate. It can be a very stressful time, which can short circuit some folks for awhile and in unexpected ways.

It sounds like your dad did a good job of having his affairs in order. Any option to sell his business?

If no one is living in the house for a certain period of time, the insurance company can cancel coverage. I don't emember the amount if time, and I don't know is there are any state laws or others that may be another variable, but someone for the estate should check this out. Also check out what 'living in the house" means - in case the family can establish that it is not vacated. The insurance company will have another type of policy to cover the property.

Also, vacant house do tend to decay - plumbing, etc breaks, so have someone at least monitoring the house, ideally using it enough to keep it in shape.

Good luck.

Spork

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Re: Death of a parent / Advice on what to do
« Reply #8 on: March 14, 2016, 07:47:40 PM »
Random followups...

As for the business (as several asked):  He was the business.  It doesn't exist without him.  It wasn't selling widgets.  It was selling his services.

For the inherited IRA, I would suggest contacting the brokerage company where the IRA is located. Vanguard has an excellent IRA transition team. Perhaps it's the same for others.

My plan is to move my portion to Vanguard.  I have an established account there.  His accounts are held at a broker he trusted, but I didn't care for.  Mine will move.

I am not sure how I can be sure the others deal with their accounts appropriately (for tax reasons).  I can ask them.  Not sure I trust them all to give a correct answer.

Is the house paid off? Do you or any of your siblings or other family members live near it? Is anyone/will anyone else be living there? Unless there's a huge rush to empty the house for some reason, I'd recommend letting that sit for a bit until everyone's had a chance to catch their breaths.

Tuskalusa is quite right about contacting the administrator of the IRA. It will need to be divided among the beneficiaries by 12/31/2017, so you do have some time to get it sorted. Make sure each beneficiary understands that they *will* have to start taking annual RMDs, no matter how old or young they are (each beneficiary's RMD will be calculated based on their own age, not your father's age). The IRA administrator can explain all that--it can get complicated.

I've been where you are twice, once for each parent, and I know the feeling of "Oh gawd it's over now the house and the business and the money and AAAAAAAHHHHHHHH I don't want to think about any of it," which is why I'm advising you to stop and rest. Wait for the death certificates to arrive (I hope you ordered a lot--everyone's going to want one), wait for the CPA's advice. Rest, sleep, eat, grieve. It will all get sorted out eventually.

Yeah, the house was paid off 20+ years ago.  It's where we all grew up.  Two of us live close, but no one will be living there.  It will sit for a while -- while the dust settles.  No one really knows what to do, but I think we all know it has to be sold.  It is a lot of house and no one needs the size or upkeep that implies.

The IRA will certainly be divided properly.  My (possibly unfounded) worry is that one of the several won't deal with it properly and toss us all into accelerated RMDs (or something similar).

We're not in any hurry to make it happen right now.  We are all still raw... and tired from a very long ordeal.

But... as G-dog says: empty houses tend to decay.  And Mom was the one that pretty much kept things running.  Since she's been gone a while now, the decay has already started happening.

G-dog

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Re: Death of a parent / Advice on what to do
« Reply #9 on: March 14, 2016, 07:58:33 PM »
Even if your dad was the business, he has a customer list that someone may be willing to pay for....
Just something to think about.
It may not be worth the hassle, but just something to think about. This info may also help the one employee find another job ( if they will need to).

Dee18

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Re: Death of a parent / Advice on what to do
« Reply #10 on: March 14, 2016, 08:31:46 PM »
It's okay if your siblings decide to handle their inheritance differently.  When my sister and I inherited an IRA from my dad, my sister cashed her share in, paying significant taxes.  The IRA was with Fidelity and they automatically withheld the taxes.  I opted for the minimum distribution annually.

Frankies Girl

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Re: Death of a parent / Advice on what to do
« Reply #11 on: March 14, 2016, 08:36:56 PM »
For the inherited IRA, I had to provide a death certificate (the funeral home asked us how many we needed).

Then we contacted the holder of the IRA (it was Fido, and I was staying with Fido) and the adviser walked me through the setup of a IRA BDA (which is how they title an inherited IRA, and in the details it contains my father's name). My sister sent in the death certificate, so I just had to reference her name since the agent was already aware of it, so you may only need to send in one and have the rest of the siblings reference that one, but do check in with the agent/rep to make sure of their procedure.

This is what I had to do:

First, opened the IRA BDA account, empty for the moment;

Then I was to send in a letter of instruction directing them to move the portion of my inheritance (mentioning that the main account listed myself and sister as 50/50 beneficiaries), and the account numbers for his account and my newly established inherited IRA account along with a copy of the death certificate (sent in with my sister's letter of instruction).

They handled the subdividing and moved my portion over to my inherited IRA account within about 2 weeks - may have been a bit less than that.

I then established an automatic RMD (my dad had already taken his for the year, so it was to be effective starting the following year). I had them withhold federal taxes to avoid a huge tax hit, since I wasn't sure just how much in taxes I'd be hit with overall during the settling of the rest of the estate.

All of this was done over the phone or by filling out paperwork and was very easy. And since it was done pretty quickly and they were aware I wanted to leave it as an IRA and just take the required minimum distributions, they made sure to follow all of the steps correctly and easily. I can change my RMD at any time, and have moved the date around some, but for the most part it really is pretty simple, and you just need to talk to Vanguard about what they need and exactly how they need it done.

When they moved my portion of the account I requested they move "in kind" and left it under management for a little while as this was my first foray into serious investing and was still sort of reeling over losing my dad, but I did take control of the account within 6 months and it was perfectly easy to sell off the crummy stuff once I understood what to do.



As far as the house selling... you get a stepped up cost on inheriting this sort of property as of the day of your father's death. So the executor will likely have to name a fair market price in probate that might need to be established through a real estate agent if the property is quite valuable or in poor repair (basically if it's one or the other extreme, otherwise just check the property tax assessment for the most recent year and that should give you a general idea). Don't lowball it, because if it sells for significantly more than the stepped up cost established in probate, y'all could have to pay cap gains since none of you are going to live in the property. Do discuss with the siblings and estate lawyer just in case my info is not completely accurate for your state/situation.



And finally, I am so sorry for your loss. I know how hard this can be, and even if you knew it was coming it still can send you reeling and feel quite overwhelming. You and your family will be in my thoughts.


« Last Edit: March 14, 2016, 08:52:43 PM by Frankies Girl »

Spork

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Re: Death of a parent / Advice on what to do
« Reply #12 on: March 14, 2016, 08:46:01 PM »
Thanks for a couple of examples.... makes me think if a few young and/or not-so-savvy among us do something stupid, it won't affect me so much.

As for the house... I suspect we will just have it appraised.  It's been exempt on tax roles due to > 65 for a while so no earthly idea what it's worth according to tax roles.... It's an odd fish.  It's a nice neighborhood, but older and not currently desired.  It needs a little work.  If you're not into a 1960s time capsule, it would need updating.  It's built like a brick shithouse and very well done... but won't be up to most people's tastes/desires today.  It particularly won't be up to people's tastes that want a house that big.  It will likely take a long while to sell.  It's going to hit a very niche market.

Zamboni

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Re: Death of a parent / Advice on what to do
« Reply #13 on: March 14, 2016, 09:31:41 PM »
My condolences. Please give yourself time to mourn.

nobody123

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Re: Death of a parent / Advice on what to do
« Reply #14 on: March 15, 2016, 07:17:03 AM »
After a few relatives have passed and they have a house and a bunch of "stuff" to get rid of, an estate auction has worked for my family.  Even crap that you would probably throw into a dumpster will be grouped into lots by the auctioneer and sold for a buck or two.  We have included the vehicles and the house itself in the auction.   It gets everything over and done with relatively quickly.  A good auctioneer will have a staff to help you get it all organized and know what the local market will bear for most items.

Personally, I would take some time to ensure that everyone has an opportunity to digest the will and what their wishes are.  Maybe one of them will want to buy out the others' share of the house, maybe one will be upset about getting less than expected and contest the will, etc.

Catbert

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Re: Death of a parent / Advice on what to do
« Reply #15 on: March 15, 2016, 11:59:17 AM »
After my Dad died, my sisters and I all visited Fidelity together while they were in town.  Fidelity set up the inherited IRA account and automatic RMD for each of us.  They suggested that it was easiest to get it moved all at once even for those who didn't plan to leave it there in the long run.  (I'm sure Fidelity also hoped that inertia would create some new customers for them.)  That's what we did although I know at least one sister withdrew much of the money in a few months for a kitchen remodel.

It sounds like you Dad had things well set up.  I hope you don't encounter any problems with siblings regarding the family home or sentimental items.  I didn't in the aftermath of my parents or in-laws, or DH1 but some families have a horrible time.

mbl

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Re: Death of a parent / Advice on what to do
« Reply #16 on: March 15, 2016, 12:38:13 PM »
Sorry to hear of your Dad's passing.

Just another small note regarding inherited IRAs.
There was a ruling in 2014 regarding this.

http://www.forbes.com/sites/deborahljacobs/2014/06/12/supreme-court-finds-inherited-iras-not-protected-in-bankruptcy/#7110e4344323


Important to understand the difference between and inherited IRA and your TiRA/Roth IRA.

Another Reader

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Re: Death of a parent / Advice on what to do
« Reply #17 on: March 15, 2016, 01:23:55 PM »
I rarely disagree with Frankies Girl, but valuing the house should not be done by tax assessment.  You will need an appraisal or at least a broker's price opinion, supported by comparable sales.  Values are in ranges, estate tax and capital gains should be considered in establishing the exact value.

Spork

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Re: Death of a parent / Advice on what to do
« Reply #18 on: March 15, 2016, 01:49:19 PM »
I rarely disagree with Frankies Girl, but valuing the house should not be done by tax assessment.  You will need an appraisal or at least a broker's price opinion, supported by comparable sales.  Values are in ranges, estate tax and capital gains should be considered in establishing the exact value.

Duly noted.  Tax assessment is way off.  The tax value was frozen many years ago when parents turned 65.

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Re: Death of a parent / Advice on what to do
« Reply #19 on: March 15, 2016, 02:05:01 PM »
After a few relatives have passed and they have a house and a bunch of "stuff" to get rid of, an estate auction has worked for my family.  Even crap that you would probably throw into a dumpster will be grouped into lots by the auctioneer and sold for a buck or two.  We have included the vehicles and the house itself in the auction.   It gets everything over and done with relatively quickly.  A good auctioneer will have a staff to help you get it all organized and know what the local market will bear for most items.

Personally, I would take some time to ensure that everyone has an opportunity to digest the will and what their wishes are.  Maybe one of them will want to buy out the others' share of the house, maybe one will be upset about getting less than expected and contest the will, etc.

+1 for estate auction/sale. A friend hired someone that specialized in estate sales. Along with pricing everything appropriately and arranging things in the house, they had a large following of people that came to shop. I'm sure it is low on your to do list, but definitely consider hiring this task out.

Capsu78

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Re: Death of a parent / Advice on what to do
« Reply #20 on: March 15, 2016, 03:01:28 PM »
After a few relatives have passed and they have a house and a bunch of "stuff" to get rid of, an estate auction has worked for my family.  Even crap that you would probably throw into a dumpster will be grouped into lots by the auctioneer and sold for a buck or two.  We have included the vehicles and the house itself in the auction.   It gets everything over and done with relatively quickly.  A good auctioneer will have a staff to help you get it all organized and know what the local market will bear for most items.

Personally, I would take some time to ensure that everyone has an opportunity to digest the will and what their wishes are.  Maybe one of them will want to buy out the others' share of the house, maybe one will be upset about getting less than expected and contest the will, etc.

+1 for estate auction/sale. A friend hired someone that specialized in estate sales. Along with pricing everything appropriately and arranging things in the house, they had a large following of people that came to shop. I'm sure it is low on your to do list, but definitely consider hiring this task out.

+2 Estate auctions are a whole little industry, usually regional but some multi state... I am on a email notification for one company that sends me upcoming sales notices every week.   There was a professionally run one around the corner from my house a week ago and I could barely get up the street for all of the cars parking.  Obviously the older gentlemen circumstances must have happened quickly because they were selling everything from his socks to his spices...  I might consider asking a trusted realtor if they know the local auction houses- I bet they keep a list around so they can get houses emptied and on the market as quickly as possible.   PS- Don't attend yourself as watching strangers handle all sorts of flotsam from your parents life can hit an emotional button. 

Spork

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Re: Death of a parent / Advice on what to do
« Reply #21 on: March 15, 2016, 03:08:39 PM »
After a few relatives have passed and they have a house and a bunch of "stuff" to get rid of, an estate auction has worked for my family.  Even crap that you would probably throw into a dumpster will be grouped into lots by the auctioneer and sold for a buck or two.  We have included the vehicles and the house itself in the auction.   It gets everything over and done with relatively quickly.  A good auctioneer will have a staff to help you get it all organized and know what the local market will bear for most items.

Personally, I would take some time to ensure that everyone has an opportunity to digest the will and what their wishes are.  Maybe one of them will want to buy out the others' share of the house, maybe one will be upset about getting less than expected and contest the will, etc.

+1 for estate auction/sale. A friend hired someone that specialized in estate sales. Along with pricing everything appropriately and arranging things in the house, they had a large following of people that came to shop. I'm sure it is low on your to do list, but definitely consider hiring this task out.

+2 Estate auctions are a whole little industry, usually regional but some multi state... I am on a email notification for one company that sends me upcoming sales notices every week.   There was a professionally run one around the corner from my house a week ago and I could barely get up the street for all of the cars parking.  Obviously the older gentlemen circumstances must have happened quickly because they were selling everything from his socks to his spices...  I might consider asking a trusted realtor if they know the local auction houses- I bet they keep a list around so they can get houses emptied and on the market as quickly as possible.   PS- Don't attend yourself as watching strangers handle all sorts of flotsam from your parents life can hit an emotional button.

Estate sales were on the todo list.  My wife is actually one of those like you guys that stalks all of the estate sales companies and attends sales every week. 

My one worry (and I'll probably get over it) is that I know the good estate sales companies take about 40% of the net.  I know they do a lot of work.  I'm just pondering how much could be DIY... and if it is worth it.  And by "worth it" ... this is not just labor, it is also a pretty big emotional burden.  I may decide the 40% is an inexpensive price to pay for unloading some of that emotional burden.

nobody123

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Re: Death of a parent / Advice on what to do
« Reply #22 on: March 17, 2016, 08:35:02 AM »
My one worry (and I'll probably get over it) is that I know the good estate sales companies take about 40% of the net.  I know they do a lot of work.  I'm just pondering how much could be DIY... and if it is worth it.  And by "worth it" ... this is not just labor, it is also a pretty big emotional burden.  I may decide the 40% is an inexpensive price to pay for unloading some of that emotional burden.

We have generally had the family come through the house to collect any sentimental items they might want the day before the auctioneer staff comes through.  After those things are gone, the rest is just "stuff" so why waste energy trying to sell it all yourself.  Only exception to that would be if there's something super expensive (fine art, coin collection, etc.) that should be given some special attention.  I look at it as I'd rather have the estate get 60% of the money after an auction then the 25% tax write off if it would have all been donated. 

Having everything over and done with in the course of a couple of days is well worth it from an emotional factor.  We have generally attended the auction to just make sure stuff didn't walk away.  Sometimes it's interesting to see what things that you thought were worthless end up going for a lot and vice versa.  I will say it is a bit sad to see a person's life reduced to boxes of stuff sold for pennies on the dollar.

The estate auctioneer we have used takes a lower percentage for vehicles and the house than the rest of the stuff (don't know if that's a state law or just his policy).

Spork

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Re: Death of a parent / Advice on what to do
« Reply #23 on: March 27, 2016, 09:26:42 AM »
Maybe this should be a new post over in the Taxes section but...

I still don't have a full grasp on handling expected inheritance.  It looks like a majority of it will be inherited tIRAs and annuities.  The small amount of research I've done makes it appear all of this will be ordinary income.  My understanding is that with $0 of earned income, putting anything into an existing tIRA is not possible.

I am FIRE with zero earned income.... and trying to wrap my head around what I can do to reduce income and MAGI.  The short answer may just be "can't do it, pay your damn taxes and insurance and don't whine about it" -- and if that's the case, that's what I'll do.

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Re: Death of a parent / Advice on what to do
« Reply #24 on: March 27, 2016, 10:08:13 AM »
As long as you transfer the tIRA's to inherited beneficiary IRA's, they will not be immediately taxed as income.  Instead, you will have to take RMD's based on your life expectancy as determined by the IRS.  The RMD's will be fairly small if you are relatively young, maybe 2 or 3 percent. 

See https://www.irs.gov/publications/p590b/ch01.html

I don't think Vanguard handles this process well.  Fidelity seems to have a better handle on the process.  It's important to make sure if IRA's are divided among multiple beneficiaries, the rules for setting up inherited IRA's are understood and followed, especially w/r/to RMD's.

You will have to research the annuities individually to see what the options are.

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Re: Death of a parent / Advice on what to do
« Reply #25 on: March 27, 2016, 10:21:46 AM »
My mother left her furniture, jewelry and china to me as her only daughter. I, in turn, had my brothers and sisters-in-law come and pick out whatever they wanted. This led to very pleasant family dynamics. In addition, I set aside some pretty pieces of her jewelry for my niece, her only granddaughter.  There were a couple of instances where multiple people wanted the same thing. We flipped a coin on those.

Spork

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Re: Death of a parent / Advice on what to do
« Reply #26 on: March 27, 2016, 10:37:16 AM »
As long as you transfer the tIRA's to inherited beneficiary IRA's, they will not be immediately taxed as income.  Instead, you will have to take RMD's based on your life expectancy as determined by the IRS.  The RMD's will be fairly small if you are relatively young, maybe 2 or 3 percent. 

See https://www.irs.gov/publications/p590b/ch01.html

I don't think Vanguard handles this process well.  Fidelity seems to have a better handle on the process.  It's important to make sure if IRA's are divided among multiple beneficiaries, the rules for setting up inherited IRA's are understood and followed, especially w/r/to RMD's.

You will have to research the annuities individually to see what the options are.

I think I have a grasp on the inherited IRAs.  I'm still working on the annuities.

I'm really trying to also get a grasp on strategies moving forward to reduce income/MAGI.  I understand that inherited IRAs will have RMDs over the lifetime... and it appears as if (not yet verified) the annuities can be drawn down over 5 years.  I'm just doing a bit of a mental shift here.  My original FIRE plans were based on very low income and doing Roth conversion laddering.  In other words: My original models going forward were to mimic what I've read other folks have written about.  (seattlecyclone,  gocurrycracker, etc).  Now I'm stepping outside of the models I've been reading about for years and looking for a new starting point.

seattlecyclone

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Re: Death of a parent / Advice on what to do
« Reply #27 on: March 27, 2016, 12:10:37 PM »
As long as you transfer the tIRA's to inherited beneficiary IRA's, they will not be immediately taxed as income.  Instead, you will have to take RMD's based on your life expectancy as determined by the IRS.  The RMD's will be fairly small if you are relatively young, maybe 2 or 3 percent. 

See https://www.irs.gov/publications/p590b/ch01.html

I don't think Vanguard handles this process well.  Fidelity seems to have a better handle on the process.  It's important to make sure if IRA's are divided among multiple beneficiaries, the rules for setting up inherited IRA's are understood and followed, especially w/r/to RMD's.

You will have to research the annuities individually to see what the options are.

I think I have a grasp on the inherited IRAs.  I'm still working on the annuities.

I'm really trying to also get a grasp on strategies moving forward to reduce income/MAGI.  I understand that inherited IRAs will have RMDs over the lifetime... and it appears as if (not yet verified) the annuities can be drawn down over 5 years.  I'm just doing a bit of a mental shift here.  My original FIRE plans were based on very low income and doing Roth conversion laddering.  In other words: My original models going forward were to mimic what I've read other folks have written about.  (seattlecyclone,  gocurrycracker, etc).  Now I'm stepping outside of the models I've been reading about for years and looking for a new starting point.

I don't know what to say about the annuities without knowing more about them.

You can withdraw the inherited TIRA money penalty-free, which means you can cut back on your Roth ladder a bit. If you think this money will be enough to last you until age 59, you may not need to use the Roth ladder at all.

Your lifetime tax burden will almost certainly be higher now than it would have been without the inheritance. In general the way to minimize it is to keep your taxable income as steady as possible from year to year. So even though you may not need to do Roth conversions to pay the bills, you may still want to do some to keep from moving to a higher tax bracket later in retirement once social security and RMDs kick in.

On the other hand, if you're counting on using Obamacare insurance, it may be better for your overall wealth to keep your income as low as possible until Medicare starts to get higher Obamacare subsidies now, and then resign yourself to paying higher taxes later. It all depends on the specifics of your situation.
« Last Edit: March 27, 2016, 12:12:35 PM by seattlecyclone »

Rural

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Re: Death of a parent / Advice on what to do
« Reply #28 on: March 27, 2016, 02:59:35 PM »
So sorry, Spork. I know it was aterrible ordeal for all of you, your dad included.


On the taxes, yes, minimizing is better, but do remember it's almost always better to have money to be taxed than to avoid tax by not having money. In other words, do what you can / want to, but don't stress yourself unduly at a time like this.

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Re: Death of a parent / Advice on what to do
« Reply #29 on: March 27, 2016, 07:52:49 PM »
No advice. But wanted to tell you I am sorry for your loss.

NDQ

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Re: Death of a parent / Advice on what to do
« Reply #30 on: April 08, 2016, 08:24:41 AM »

First off: thanks to those offering condolences and advice.  It really is appreciated.  I am not always very good at the social contract of expressing gratitude (or any emotions).  I'm trying to be better about that.  So: Thanks.  Really.

---

As other things come up... I'll just continue this thread rather than starting a new one.

Today's issue:

Dad had some interest in an oil exploration company.  IMO, it's sort of a scammy investment.  Not scammy like: illegal.  Just scammy like: this makes a small core folk in the center some money and has everyone on the outskirts hooked like they're playing a slot machine.  Dad was funny with his investments.  He never really saw them as "slow and steady will have huge returns over time."  He saw them as "invest in a whole bunch of million to one shots and one of them will hit it BIG."  He died pretty wealthy, but had he just bought boring investments, he would have died super wealthy.

I digress.  I've been paying his bills for the past several months during his illness.  This oil company has monthly maintenance fees which vary from $200-$500 a month.  I suspect they also have some ever-so-often payout (like a slot machine) to keep you engaged.  I don't have an income/expense report going back over the years to really see if this is a net winner or loser.  I do pretty much know this type of investment is probably not for me (and likely not for the others in the distribution either).

We have talked to the oil company and pretty much all they are willing to do is divide the shares as the will stipulates.  They don't want to buy back the shares and they are not in the business of arranging for sale.

This is a small operation -- likely you've never heard of it.

I've talked to an uncle -- who also had some shares in this company.  He had the same gut feeling about them: they weren't the investment for him.  I asked him how he got rid of them and his answer was "well, your dad bought my shares."  Perfect.

How would you deal with this?  This is not an investment for me (and I suspect the same of the others).  Do you just write the company a letter saying "Hey, no thanks.  Piss off.  Send me a maintenance bill and I'll send you a photo of me burning it."

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Re: Death of a parent / Advice on what to do
« Reply #31 on: April 08, 2016, 03:32:29 PM »


Dad had some interest in an oil exploration company.  IMO, it's sort of a scammy investment.  Not scammy like: illegal.  Just scammy like: this makes a small core folk in the center some money and has everyone on the outskirts hooked like they're playing a slot machine.  Dad was funny with his investments.

 This oil company has monthly maintenance fees which vary from $200-$500 a month.  I suspect they also have some ever-so-often payout (like a slot machine) to keep you engaged.

We have talked to the oil company and pretty much all they are willing to do is divide the shares as the will stipulates.  They don't want to buy back the shares and they are not in the business of arranging for sale.


WTF. Your dad has a timeshare for an oil well? That's what this sounds like.
I'd want to see whatever papers I could get on the contract on the shares your dad has, and the corporation (to figure out what their obligations are, where they are incorporated, etc.). Either your estate attorney can help, or maybe your (or your dad's) State Atrorney General's Office. Sounds like they are a private corp (not publicly traded).
Worst case, don't pay the fees, see what happens.

Spork

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Re: Death of a parent / Advice on what to do
« Reply #32 on: May 12, 2016, 11:09:48 AM »
Followup.... more advice needed.

One of my dad's investments was some sort of annuity that was also tied into life insurance.  I'm sure this was not a great investment vehicle, but that doesn't really matter now.

In looking at it, it very much appears as if somewhere along the line the beneficiary assignment forms were sent in unsigned and the insurance company just tossed them in the trash (rather than saying "hey... maybe you want to sign this, please.")  The result is that the payment went to the estate, rather than to the intended beneficiaries.

Now: that's not such a big deal.  The estate is divided in the same way he would have assigned them in the beneficiary forms.  The question I have is in regards to taxes.  This is an annuity and, assuming I understand it correctly, the principle is untaxed and the earnings are taxed.  The policy is very old, meaning the earnings are likely to be somewhat significant.  Had this been sent to the beneficiaries, we would (I think) have gotten forms allowing us to annualize the payout over 5 years.

The executor has talked to a lawyer on how this affects taxes.  His advice was that if the funds are held in the estate until 2017, the taxes will be owed by the estate.  If they are distributed before then, they are owed by the beneficiaries.

This seems odd to me, but assuming that's true, how does that work with 2016 taxes if they are distributed?  I presume there will be a 1099-something going to the estate, since that is where the funds were originally distributed.  How would each of the beneficiaries account for that since the 1099 would be attached to someone else's tax id?  How would you annualize the payout after the fact?

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Re: Death of a parent / Advice on what to do
« Reply #33 on: May 12, 2016, 12:08:43 PM »
It's pretty common to have people own tiny parts of oil wells. What I haven't heard of is having to pay ongoing costs for them. I would call the company again and find out what the agreement on this investment structure is. There must be some way of ending the investment, though I'm sure you won't get any money for it.

Spork

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Re: Death of a parent / Advice on what to do
« Reply #34 on: May 12, 2016, 12:35:53 PM »
It's pretty common to have people own tiny parts of oil wells. What I haven't heard of is having to pay ongoing costs for them. I would call the company again and find out what the agreement on this investment structure is. There must be some way of ending the investment, though I'm sure you won't get any money for it.

I think we (eventually) have the wells taken care of ... by gifting them to someone that thinks they want them.  It may still take a few months because every beneficiary has to sign a form, send it to the giftee, then the giftee has to take it to a county office many hours away from his house and file it.  Based on how long it is taking to get everyone to sign very simple life insurance forms, I think this should be handled in under 5 years.