Large Inheritance

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exoilman
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Location: New Jersey

Large Inheritance

Post by exoilman »

A family friend lost her aunt. She is the sole beneficiary of a 12M brokerage acct. and she wants to know what an accountant and lawyer should be charging (fee or percentage)? Her aunts will has her as executor and basically some small amounts to a few friends some of whom are deceased. Any guidance here will be appreciated. I just don't want her to get the runaround. She is 70, married with 2 married children and 4 grandchildren. PM me if appropriate.

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Sam
cmr86
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Re: Large Inheritance

Post by cmr86 »

Certainly not an expert, but perhaps this page will help a bit?

http://www.bogleheads.org/wiki/Managing_a_windfall
Grt2bOutdoors
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Re: Large Inheritance

Post by Grt2bOutdoors »

Careful! Depending on the state and integrity of professional, some of them will want to take a healthy percentage of the estate (5% is a number I often hear thrown about). :annoyed
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
placeholder
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Re: Large Inheritance

Post by placeholder »

Did this account pass through probate or was there a transfer on death beneficiary (assuming this is not an IRA) and are you in a state with attorney's fees that are set by law?
bsteiner
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Re: Large Inheritance

Post by bsteiner »

A percentage fee has to be at the upper end of the estimated range since the lawyer is taking on additional risk, but it's unlikely to be anywhere near 5% absent litigation or some other unusual circumstances.
placeholder wrote:Did this account pass through probate or was there a transfer on death beneficiary (assuming this is not an IRA) and are you in a state with attorney's fees that are set by law?
The work involved is essentially the same in either case, so the cost is about the same. Probating the Will is a small part of the work in an estate administration, and the work to probate the Will is the same regardless of the size of the estate.
placeholder
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Re: Large Inheritance

Post by placeholder »

I thought that for a TOD the beneficiary presents the death certificate and gets the assets directly and the executor and probate attorney have nothing to do with it or have I misunderstood how that works (of course for that large of an estate there are estate taxes).
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Raymond
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Re: Large Inheritance

Post by Raymond »

OP,

As mentioned above, was the brokerage account a Transfer on Death (TOD) account?

If so, probate does not factor into the transfer of assets: "Transfer on Death (TOD) Registration" - SEC
"Ritter, Tod und Teufel"
Retread
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Re: Large Inheritance

Post by Retread »

exoilman wrote:She is the sole beneficiary of a 12M brokerage acct...
Sam,

It would help to know a bit more about the estate. Your question implies there is a POD on a brokerage account and she is the beneficiary. I suspect, however, that a person with a brokerage account that size also has other assets that need to be dealt with. I recently managed an estate with a $2M brokerage account with a POD and all the firm needed was a death certificate and the account was distributed. If that is the instant case, the main role of the attorney and CPA would be to complete the Federal Estate Tax Return and any state return along with the decedent's final income tax returns. You should be able to find a good trusts and estates firm that would be happy to handle this on an hourly basis.
Bruce
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Boglegrappler
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Re: Large Inheritance

Post by Boglegrappler »

Every place has different practices.

There will need to be an estate tax filed, and since the estate is that large there will be a very substantial estate tax payment. A quick rough estimate would be 12MM minus the 5.2mm exemption, times about 40%, which means about 6 3/4 MM x .40, or 2.7MM in taxes. That's just the federal amount, and there would be more if the state has an estate tax. If the aunt had the benefit of inheriting the exemption from a deceased husband who died after 2010, then the exemption could be double the 5.2mm, and the tax would be much lower, but it depends on certain circumstances.

I think if I lived near a big city I'd find the largest, most well known law firm in that town and meet with their estate tax partner. My guess is that you'll get a more honest fee and more expertise from someone like that than you will if you use friends or acquaintances. Of course, the aunt may have already involved the lawyer somehow during the drafting of the will, so you may have to factor that in. In a smaller city your mileage may vary, and you are more at risk for getting overcharged, in my opinion.

Another thing to consider, depending on the provisions in the will, is that it is possible, I think, to "disclaim" some of your inheritance, in which case the disclaimed part will pass to the other people named in the will. If the people named are your own heirs, this would be a way of willing to them some of the proceeds of the estate now, rather than having it pass through your own estate and be taxed again. This would lower your total estate tax, and leave more for everyone in the end, but doing it depends on whom the other beneficiaries are who would inherit if you weren't there (alive) to inherit.

I really would recommend finding a lawyer at a big firm who does this all day. Those who don't are learning on the job. I know of a very experienced local lawyer who wasn't aware the mortgage interest on mortgage amounts over $1mm wasn't deductible, because he didn't normally see those amounts.

I just don't know what it should cost, but it seems to me that it should be doable for less than $100,000 in total fees, and probably for a great deal less than that....possibly under $50K. I think most estate tax lawyers will bill by the hour, and not charge a %. I'm not sure an accountant is needed at all.
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