dissemination of assets upon spousal death, probate process, and other questions

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pescador
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Joined: Wed Mar 14, 2012 1:49 pm

dissemination of assets upon spousal death, probate process, and other questions

Post by pescador »

my wife recently passed. it has been two weeks of hell with terrible decisions and no good outcomes. she was in the ICU for 2 weeks, so i am anticipating some monumental hospital/insurance bills. At this point, i have been looking into her/our assets and which may be shielded from creditors.

I spoke with the title company about the deed on our primary residence in VA. They indicated that the deed had our names "as husband and wife" and that the property would have to go to probate. That was very disconcerting to find out that there was no right of survivorship and it would have to go through the probate process. Is this correct? It is unfathomable that our house could be in jeopardy.

My wife also recently purchased a separate property in her name only which I expected would be in probate along with her car and some other items.

I set up and managed her retirement accounts which are at Vguard and i am the beneficiary. From what i gather, i will have to take RMDs even though i am 48. Is there a time limit for making that transfer? Can I let it just sit so I don't have to take RMDs?

This has been such a tough process and there is no end in sight.

Thanks in advance for your insights.
Luckywon
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Re: dissemination of assets upon spousal death, probate process, and other questions

Post by Luckywon »

pescador wrote: Fri May 14, 2021 5:01 pm my wife recently passed. it has been two weeks of hell with terrible decisions and no good outcomes. she was in the ICU for 2 weeks, so i am anticipating some monumental hospital/insurance bills. At this point, i have been looking into her/our assets and which may be shielded from creditors.

I spoke with the title company about the deed on our primary residence in VA. They indicated that the deed had our names "as husband and wife" and that the property would have to go to probate. That was very disconcerting to find out that there was no right of survivorship and it would have to go through the probate process. Is this correct? It is unfathomable that our house could be in jeopardy.

My wife also recently purchased a separate property in her name only which I expected would be in probate along with her car and some other items.

I set up and managed her retirement accounts which are at Vguard and i am the beneficiary. From what i gather, i will have to take RMDs even though i am 48. Is there a time limit for making that transfer? Can I let it just sit so I don't have to take RMDs?

This has been such a tough process and there is no end in sight.

Thanks in advance for your insights.
Sincere condolences on your loss.

What kind of health insurance did your wife have? Most policies have out of pocket maximums. Perhaps the bills after insurance payments will be much less than you expect.

You can elect to roll her retirement accounts to your own IRA, so you should not have to take RMD's until the year you turn 72.
jebmke
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Re: dissemination of assets upon spousal death, probate process, and other questions

Post by jebmke »

I would check with the court on the jointly owned real estate. I helped my wife settle two family members estates and found them very knowledgeable (Alexandria, area).

With respect to the IRA, my understanding is that as her spouse, you can elect to have this combined with your own IRA (if you have one) or re-titled into your name and take the RMD as if it was your IRA (starting at age 72).
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Not Law
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Re: dissemination of assets upon spousal death, probate process, and other questions

Post by Not Law »

Treat her retirement accounts as inherited. There will be no 10% penalty for withdrawals before age 59.5 if you do this. Once you reach 59.5, you can add the account to your IRA if that makes sense for RMD concerns. BUT if you file for bankruptcy, the inherited IRA is not protected from creditor claims, while the rolled over amount would be.
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pescador
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Re: dissemination of assets upon spousal death, probate process, and other questions

Post by pescador »

thank you all so far - i need to get and provide further details on her retirement accounts.

I know she had 2 - one roth IRA and I believe a SEP IRA - i will confirm that and report back tomorrow. I have a roth IRA and trad 401(k). I would like to avoid any RMDs if possible, so if I can combine roths for instance without incurring RMDs that would be perfect. This will be something I ask Vguard tomorrow.

with regard to our primary residence - my totally inexperienced and possibly incorrect understanding is the deed wording "as husband and wife" does not include any rights to survivorship and the state of VA is not a community property state. i will check up with the courts RE the jointly owned house. how were you able to do this or was this through the probate process? I have no idea how to go about that.

i am also running down the details of her health and life insurance with her employer and will provide updates as they come.

Thanks again.
GmanJeff
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Re: dissemination of assets upon spousal death, probate process, and other questions

Post by GmanJeff »

Here is some information which may be helpful: https://www.vba.org/page/guide_estates

You'll be able to obtain more specific information from the website of the Circuit Court for the County where you reside, e.g., https://www.fairfaxcounty.gov/circuit/p ... of-estates

Vanguard will require a copy of the Certificate of Qualification/Letters Testamentary which you will receive from the Probate Department of the cognizant Circuit Court after you qualify as the executor for the estate. To qualify, you'll need to provide the Probate Department with the original signed copy of the will naming you as executor.

Keep good records of estate-related income and expenses; you'll need them to prepare required annual accounting submissions, the first of which is due 16 months from the date you qualify as executor; it covers the first 12 months of administration.

If you have any hesitation about your ability to work through the probate process, you may want to consult a probate attorney to assist you. Failing to meet various deadlines and/or to properly prepare and submit required documentation can result in expensive penalties.
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RickBoglehead
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Re: dissemination of assets upon spousal death, probate process, and other questions

Post by RickBoglehead »

Virginia rules on real estate: https://www.metrotitle.pro/how-to-hold-title/
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Big Dog
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Re: dissemination of assets upon spousal death, probate process, and other questions

Post by Big Dog »

GmanJeff wrote: Fri May 14, 2021 6:44 pm Here is some information which may be helpful: https://www.vba.org/page/guide_estates

You'll be able to obtain more specific information from the website of the Circuit Court for the County where you reside, e.g., https://www.fairfaxcounty.gov/circuit/p ... of-estates

Vanguard will require a copy of the Certificate of Qualification/Letters Testamentary which you will receive from the Probate Department of the cognizant Circuit Court after you qualify as the executor for the estate. To qualify, you'll need to provide the Probate Department with the original signed copy of the will naming you as executor.

Keep good records of estate-related income and expenses; you'll need them to prepare required annual accounting submissions, the first of which is due 16 months from the date you qualify as executor; it covers the first 12 months of administration.

If you have any hesitation about your ability to work through the probate process, you may want to consult a probate attorney to assist you. Failing to meet various deadlines and/or to properly prepare and submit required documentation can result in expensive penalties.
In general, if the OP is listed as a beneficiary on her IRA's, they will not be subject to probate. OP just has to submit a certified copy of the death cert to transfer over the retirement accounts. A taxable brokerage account, however, could be subject to probate if it is not registered as WROS.
Big Dog
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Re: dissemination of assets upon spousal death, probate process, and other questions

Post by Big Dog »

pescador wrote: Fri May 14, 2021 6:26 pm thank you all so far - i need to get and provide further details on her retirement accounts.

I know she had 2 - one roth IRA and I believe a SEP IRA - i will confirm that and report back tomorrow. I have a roth IRA and trad 401(k). I would like to avoid any RMDs if possible, so if I can combine roths for instance without incurring RMDs that would be perfect. This will be something I ask Vguard tomorrow.

with regard to our primary residence - my totally inexperienced and possibly incorrect understanding is the deed wording "as husband and wife" does not include any rights to survivorship and the state of VA is not a community property state. i will check up with the courts RE the jointly owned house. how were you able to do this or was this through the probate process? I have no idea how to go about that.
Any persons may own real or personal property as joint tenants with or without a right of survivorship. When any person causes any real or personal property, or any written memorial of a chose in action, to be titled, registered, or endorsed in the name of two or more persons "jointly," as "joint tenants," in a "joint tenancy," or other similar language, such persons shall own the property in a joint tenancy without survivorship as provided in § 55.1-134. If, in addition, the expression "with survivorship," or any equivalent language, is employed in such titling, registering, or endorsing, it shall be presumed that such persons are intended to own the property as joint tenants with the right of survivorship as at common law.
It is unfortunate the your closing attorney did not explain this to you. If their firm is still around, I'd call and complain. (won't do much, but at least they can check their records...)
Luckywon
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Re: dissemination of assets upon spousal death, probate process, and other questions

Post by Luckywon »

Maybe I am not understanding your concerns correctly but whether your spouse's assets go through probate may not ultimately determine the disposition of medical debt because many states (including Virginia) hold a spouse responsible for medical debts anyway.

Since your spouse had employer based medical insurance, I would be optimistic it is ACA compliant and the maximum out of pocket expense of $8550 would apply. If there were out of network or other noncovered treatments, those may be in addition.

FWIW I was executor for a deceased relative who had balance billing due from some out of network medical providers. When I told them the patient was deceased they wrote the balances off.
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pescador
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Re: dissemination of assets upon spousal death, probate process, and other questions

Post by pescador »

thank you all for your continued guidance and support.

Gman the vba website was very helpful.

https://investor.vanguard.com/inherit/ira-rmd

this also explains the inheritance process for IRAs in detail, RMDs the ten year rule etc.
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pescador
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Re: dissemination of assets upon spousal death, probate process, and other questions

Post by pescador »

additional update and clarifications requested:

i spoke with Vguard and i am the sole beneficiary of her roth and SEP IRAs. I asked several questions regarding potential options. the language that the representative used was "assume or inherit" as basically my two options. the representative indicated inheriting involved a rollover and I would be subject to the 10 year rule.

Please correct me if i am wrong, but i thought that this was NOT the case. Surviving spouses who are direct beneficiaries are not subject to the 10 year rule. I mentioned this to the representative, but he indicated otherwise.

At this point, my main concern is the exposure of our primary residence in the probate process. I would like to retain the option to use her funds, in the event that it is necessary, without subjecting myself to the 10% penalty. As I understand it, if the account remains in her name (if I do nothing), I can access these funds before reaching the RBD without incurring the 10% penalty. I am 48 and she was 47.

https://www.kitces.com/blog/spousal-rol ... -401k-rmd/

This has been a resource that I have found useful, but hopefully not outdated. I believe that there may have been some changes with the ACA, but I am so out of my realm here. I have not done anything yet, and do not intend to until I fully understand every choice and resulting outcome. Please let me know if I am on the right track.
Freetime76
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Re: dissemination of assets upon spousal death, probate process, and other questions

Post by Freetime76 »

I think you have it right. You want to treat it as your own IRA. That may be what assume means - take it as your own account, not subject to the 10 year withdrawal (you’re close enough in age that the IRS will allow it).

Here is a link to the IRS site info:
https://www.irs.gov/retirement-plans/pl ... eneficiary
And here (scroll down to What if you inherit an IRA):
https://www.irs.gov/publications/p590b

(Edited for about 16 typos, ouch)
Freetime76
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Re: dissemination of assets upon spousal death, probate process, and other questions

Post by Freetime76 »

P.S. I remember that in a Roth, you can withdraw the contributions tax free after a certain number of years (the amount put in, not the gains).

ETA: below, only for a qualified disaster in 2021 :oops: :
The 2020 stimulus legislation had changed the withdrawal rules for retirement accounts so that you could have pulled money out or taken a loan from the account without a penalty in 2020 (I think it was up to 100K), but of course a person still would have owed income tax on tax deferred accounts such as IRAs and 401Ks.

On the deed, it did not have any words other than husband and wife? (No tenants in common...anything? )

It depends on how much money you need, if you need it and when ...and I realize you don’t know those things yet. Sorry, not hugely helpful, I know.
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cchrissyy
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Re: dissemination of assets upon spousal death, probate process, and other questions

Post by cchrissyy »

I'm sorry for your loss

This thread for a recent widow is full of wise and detailed advice which may help you

viewtopic.php?t=345536
GenawithanE
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Re: dissemination of assets upon spousal death, probate process, and other questions

Post by GenawithanE »

With respect to your real estate, I wonder if the language “as husband and wife” is the magic language to reflect a tenancy by the entireties, which is even better than a joint tenant with right of survivorship. In that case, my understanding is that you have become the sole owner by operation of law. Something to ask an estate or real estate lawyer.
neverpanic
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Re: dissemination of assets upon spousal death, probate process, and other questions

Post by neverpanic »

IANAL
Freetime76 wrote: Mon May 17, 2021 10:05 pm P.S. I remember that in a Roth, you can withdraw the contributions tax free after a certain number of years (the amount put in, not the gains).
Roth contributions can be withdrawn at any time, tax- and penalty-free.
pescador wrote: Mon May 17, 2021 3:45 pm At this point, my main concern is the exposure of our primary residence in the probate process. I would like to retain the option to use her funds, in the event that it is necessary, without subjecting myself to the 10% penalty. As I understand it, if the account remains in her name (if I do nothing), I can access these funds before reaching the RBD without incurring the 10% penalty. I am 48 and she was 47.
I'm really sorry about your loss, but though it's only a small comfort, the out-of-pocket cost of her end-of-life medical care is likely to be a lot less than you may be anticipating.

You will inherit the home.
I am not a financial professional or guru. I'm a schmuck who got lucky 10 times. Such is the life of the trader.
PaunchyPirate
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Re: dissemination of assets upon spousal death, probate process, and other questions

Post by PaunchyPirate »

OP, if you "assume" the IRAs, they will simply be switched over to become part of your own IRA, although initially in a separate IRA account. You may then roll them over into your own existing IRA account if you wish. Most spouses probably do the combining portion of this out of simplicity. Assuming an IRA means the RMDs from them become whatever YOUR RMD requirements are or will be.

If you take it as an inherited IRA, you do need to know the corresponding RMD rules.

https://tickertape.tdameritrade.com/ret ... sion-16710
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pescador
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Re: dissemination of assets upon spousal death, probate process, and other questions

Post by pescador »

cchrissyy and others - thank you for all of your insight.

I have the deed and there is no language other than the grantors names, our two names, "as husband and wife", grantees etc. No tenants in common JOWS, etc. I intend to discuss this with a lawyer; however, the title company indicated that I would have to go through probate which does not give me the warm fuzzies.

after further research and consideration, I am leaning toward the transfer to an inherited SEP/Roth IRA option.

https://investor.vanguard.com/inherit/ira

it indicates that the IRA owners spouse (me) will be excepted from the 10 year rule. In this way I can still access the money, if necessary, without the 10% penalty. Hopefully probate will not force this option and I can assume/roll over etc. after that is done.

I am wondering if it is possible to parse off additional accounts from the funds and leave to different beneficiaries? I may like to separate some of her funds for her nephews.

Thanks again all, I will keep checking in and updating but I am going a mile a minute right now.
Luckywon
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Re: dissemination of assets upon spousal death, probate process, and other questions

Post by Luckywon »

If you have not already, I suggest you hire a probate attorney to make sure your spouse's estate is handled in the best way for you. Not to say you should not continue to get information here and elsewhere but certainly the information here should supplement competent legal counsel.
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Re: dissemination of assets upon spousal death, probate process, and other questions

Post by bsteiner »

pescador wrote: Wed May 19, 2021 4:35 pm ...

I have the deed and there is no language other than the grantors names, our two names, "as husband and wife", grantees etc. No tenants in common JOWS, etc. I intend to discuss this with a lawyer; however, the title company indicated that I would have to go through probate which does not give me the warm fuzzies.
...
I would have expected it to have been a tenancy by the entirety (which about half the states have). In most states that have tenancy by the entirety, naming spouses and adding "husband and wife" is sufficient to create a tenancy by the entirety.

However, I saw and was surprised by Virginia Code §§ 55.1-134, 55.1-135 and 55.1-136: https://law.lis.virginia.gov/vacode/55.1-134/, https://law.lis.virginia.gov/vacode/55.1-135/, https://law.lis.virginia.gov/vacode/55.1-136/.

I would suggest discussing this with the attorney who will be handling the estate to confirm the effect of this in Virginia.

You probate the Will, not the assets. Probating a Will is generally not particularly difficult, expensive or burdensome. If your wife had any assets in her own name other than life insurance or retirement benefits payable to a named beneficiary you would probably probate her Will anyway.
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pescador
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Re: dissemination of assets upon spousal death, probate process, and other questions

Post by pescador »

let me add one more clarification, there is no will so the court proceedings will be intestate.

I also do intend to consult with a probate/estate attorney. At this point, I am looking into the whole process so that I can generate a list of questions and subjects for clarification when that time comes.

Thank you all for your continuing guidance.
water2357
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Re: dissemination of assets upon spousal death, probate process, and other questions

Post by water2357 »

If you haven't read IRS publication 590B Distributions from IRAs, it is a good resource for information on the rules for a person inheriting their spouse''s IRAs. A spouse has more options than a nonspouse beneficiary. If you decide to keep the IRA in your spouse's name to take advantage of those options, make sure the IRA is retitled properly. It will need to state something in the title to indicate the IRA is the spouse's for the benefit of you. Since your spouse is a year younger, you wouldn't be required to take RMDs until your spouse would have reached the age of 72 (based on current law), however you will also have to wait to take penalty free withdrawals until your spouse would have reached age 59 1/2. And you must keep these "beneficiary" IRA monies separate from any other IRAs, because as soon as you put other money in it, it automatically will be considered your IRA. See pub 590B for more explanation.

https://www.irs.gov/forms-pubs/about-publication-590-b

Inherited from spouse.

If you inherit a traditional IRA from your spouse, you generally have the following three choices. You can:
1.Treat it as your own IRA by designating yourself as the account owner;
2.Treat it as your own by rolling it over into your IRA, or to the extent it is taxable, into a:
a.Qualified employer plan,
b.Qualified employee annuity plan (section 403(a) plan),
c.Tax-sheltered annuity plan (section 403(b) plan),
d.Deferred compensation plan of a state or local government (section 457 plan); or
3.Treat yourself as the beneficiary rather than treating the IRA as your own.

Treating it as your own.
You will be considered to have chosen to treat the IRA as your own if:
•Contributions (including rollover contributions) are made to the inherited IRA, or
•You don't take the required minimum distribution for a year as a beneficiary of the IRA.
You will only be considered to have chosen to treat the IRA as your own if:
•You are the sole beneficiary of the IRA, and
•You have an unlimited right to withdraw amounts from it.
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