Helping Relatives with Inheritance for Minors

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b42
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Helping Relatives with Inheritance for Minors

Post by b42 »

I'm helping my aunt and uncle with an inheritance situation, and I'd like to get some input on what we plan to do, if it is even possible.

My uncle's father passed away a few years ago. The process of sorting through and selling off his assets took some time, but is now complete. My uncle is the executor and has control over how the funds are distributed. There were five kids who received an even split of the funds. Four of the five have received their money. The fifth is still deciding on how this money can be distributed. His total share is about $120k.

The fifth sibling does not want to receive the money directly. Instead, he would prefer that the money went to his children split 50/50, ages 3 and 9. However, neither may be in a position (or want) to go to college in the future, so he specifically does not want the money tied up in something like a 529 plan (I've already talked to my aunt and uncle about this, and they seem set to just do what the fifth sibling wants so they can close out the estate).

So my questions are:

1. Is there a preferred method to get this money from the estate account to two accounts for the children, with my aunt listed as the custodian on the account (the father does not want to manage the money at all, and my uncle has medical issues and will most likely not be around in 10-15 years)?
2. Does the Uniform Gift to Minors Act come into play here? Are we able to create two accounts at Vanguard which would be taxable accounts for each child (I know this won't be ideal from a tax perspective, but at this point my aunt and uncle just want this to be done as soon as possible)? These accounts would then be accessible by my aunt to make buying/selling decisions (and in some cases funds may be withdrawn), and then at 18 or 21 the account ownership would shift to the two children.
3. Also, my aunt and uncle have Voyager Select status, so would customer service be able to help us set all of this up?

Does there appear to be anything that I am overlooking? I'm trying to help make this process as easy as possible for my aunt and uncle.
Grt2bOutdoors
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Re: Helping Relatives with Inheritance for Minors

Post by Grt2bOutdoors »

Given the size of the accounts, the need potentially to attach certain stipulations on how/when monies can be spent, and to protect the minors - you may want to bypass the UTMA and proceed directly to having the monies placed in a trust vehicle that requires the use of a knowledgable estates and trust attorney. Have the father think carefully what he wants the trust to do and not to do - the fastest way to attract flies is to not structure account correctly.
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Flobes
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Re: Helping Relatives with Inheritance for Minors

Post by Flobes »

You may need to confirm that this is legit. It may be that while the "hold-out" sibling can disclaim receiving his share, he may not be able to redirect to whom these inherited proceeds go, unless the will specifically provides for it.

When my family settled an estate, my sister wanted to disclaim her share and have it split between her children, my nephews. This was specifically prohibited. There was no objection raised by parties involved. But legally, any parts of the inheritance she disclaimed then reverted back to the estate to be distributed among the named beneficiaries.

The will was rather simple: split between the siblings, "as they see fit." Will made no mention of contingent beneficiaries or children of beneficiaries. My nephews were not named in the will; they could not be its beneficiaries. The term "as they see fit" covered how to divide the assets (i.e. Who gets the pearls?") but could not mean who else we might give inherited proceeds, even if we were amicable and in agreement.

I don't at all know if this was per state law, or probate, or ?? And I don't know if this was some unique circumstance or a typical process. NB I am not a lawyer now, and was not one then... but lawyers were involved.
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dm200
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Re: Helping Relatives with Inheritance for Minors

Post by dm200 »

You may need to confirm that this is legit. It may be that while the "hold-out" sibling can disclaim receiving his share, he may not be able to redirect to whom these inherited proceeds go, unless the will specifically provides for it.
I agree. I strongly suggest consulting with an estate experienced attorney.
aristotelian
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Re: Helping Relatives with Inheritance for Minors

Post by aristotelian »

Is there a reason the fifth sibling won't just accept the money and then put it in UTMA's or gift it to his kids? He is creating a legal and paperwork headache for the executor. Seems to me that would be the cleanest legally to get the money where the inheritor wants it but also honor the wishes of the deceased. As far as I know, there would be no tax consequence.
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bengal22
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Re: Helping Relatives with Inheritance for Minors

Post by bengal22 »

I would mail a check to the 5th sibling and let him divide up the funds as he chooses.
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dm200
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Re: Helping Relatives with Inheritance for Minors

Post by dm200 »

bengal22 wrote:I would mail a check to the 5th sibling and let him divide up the funds as he chooses.
Yes - I would not get dragged down in a complicated mess.
Gill
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Re: Helping Relatives with Inheritance for Minors

Post by Gill »

It appears he never disclaimed his interest in the estate. The executor must distribute the share to this sibling, although he could direct the executor as to how to do this. Any transfer to others would be a taxable gift. He can direct it any way he wishes but it is his inheritance. The executor can only distribute to the sibling or as he directs. The minors haven't inherited anything.
Gill
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Re: Helping Relatives with Inheritance for Minors

Post by Gill »

OP, just to bump this, are you clear on the fact that there are no minors (known legally as infants) who have inherited anything and the executor is required to distribute to the named beneficiaries?
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal
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b42
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Re: Helping Relatives with Inheritance for Minors

Post by b42 »

Gill wrote:OP, just to bump this, are you clear on the fact that there are no minors (known legally as infants) who have inherited anything and the executor is required to distribute to the named beneficiaries?
Gill
I apologize for the delay in answering, but I do have an update that just happened yesterday.

Thank you all for your comments and insights on this situation. After consideration of the issues (and legality) with trying to send the inheritance directly to the minors, my aunt and uncle (along with the 5th sibling) decided to send the share of the inheritance straight to the sibling, who will now have the option to do as he pleases with the funds.
Gill
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Re: Helping Relatives with Inheritance for Minors

Post by Gill »

b42 wrote:
Gill wrote:OP, just to bump this, are you clear on the fact that there are no minors (known legally as infants) who have inherited anything and the executor is required to distribute to the named beneficiaries?
Gill
I apologize for the delay in answering, but I do have an update that just happened yesterday.

Thank you all for your comments and insights on this situation. After consideration of the issues (and legality) with trying to send the inheritance directly to the minors, my aunt and uncle (along with the 5th sibling) decided to send the share of the inheritance straight to the sibling, who will now have the option to do as he pleases with the funds.
You're dong the right thing. I've felt all along you have no other choice.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal
afan
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Re: Helping Relatives with Inheritance for Minors

Post by afan »

Now the dad can set up trusts for the kids, fund them and lat the assets grow.
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