Estate Question

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JeffA
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Joined: Thu Jul 11, 2019 2:30 pm

Estate Question

Post by JeffA » Thu Jul 11, 2019 2:38 pm

My brother and I are executors/beneficiaries of my Mom's Estate. Basically my Mom split our inheritance 60/40 between my brother and I (which is fine with me). My question is that because of that, how are all the Estate bills paid? (taxes owed/lawyers/capital gains etc.) Should the person inheriting more also pay the same ratio for all the expenses necessary to settle the Estate? Or does the Estate just pay all the bills and once it is settled, then the remainder is dispersed according to the terms of the will? Not much info about this on the internet,so just thought I would ask. Thanks!

JoeRetire
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Joined: Tue Jan 16, 2018 2:44 pm

Re: Estate Question

Post by JoeRetire » Thu Jul 11, 2019 2:56 pm

JeffA wrote:
Thu Jul 11, 2019 2:38 pm
My brother and I are executors/beneficiaries of my Mom's Estate. Basically my Mom split our inheritance 60/40 between my brother and I (which is fine with me). My question is that because of that, how are all the Estate bills paid? (taxes owed/lawyers/capital gains etc.) Should the person inheriting more also pay the same ratio for all the expenses necessary to settle the Estate? Or does the Estate just pay all the bills and once it is settled, then the remainder is dispersed according to the terms of the will? Not much info about this on the internet,so just thought I would ask. Thanks!
Settle the estate's obligations first. Any remainder gets distributed to the heirs per the will.

Hopefully you are working your mom's estate attorney. This is a simply question that the attorney can answer for you.

123
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Re: Estate Question

Post by 123 » Thu Jul 11, 2019 2:57 pm

The most common practice seems to be paying all estate bills first and then distributing the balance in accordance with the will.
The closest helping hand is at the end of your own arm.

Rwsavory
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Joined: Mon Mar 07, 2016 8:17 pm

Re: Estate Question

Post by Rwsavory » Thu Jul 11, 2019 3:01 pm

The will should define the residuary estate to be distributed. It is usually net of all claims and expenses without proration. If you are unsure after reading the will you should hire an attorney to assist you.

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Kenkat
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Location: Cincinnati, OH

Re: Estate Question

Post by Kenkat » Thu Jul 11, 2019 3:12 pm

I would pay all bills from the estate and then close the estate and distribute what remains.

The effect will be the same regardless, however, since paying out of the estate reduces the remainder of the funds that will be split 60/40 anyway. So whether you split expenses or the remainder, it’s still 60/40.

Rudedog
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Re: Estate Question

Post by Rudedog » Thu Jul 11, 2019 3:19 pm

For my Mother's estate two years ago, the Estate stayed open for about a year. During that time we paid all the bills from the estate, also filed her final individual income tax returns and paid income tax due. After a year, when we had paid all bills received, and we knew of no other expenses, the final distributions to the beneficiaries were paid. Keep a file of everything received and paid. Work with your attorney.

Gnirk
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Re: Estate Question

Post by Gnirk » Thu Jul 11, 2019 7:56 pm

Pay all of the bills, taxes, and other estate expenses out of the estate's funds. Keep very good records of all income the estate receives from bank interest, investments, etc as well as all bills paid. Then divide whatever is left over. I kept my mom's estate open for 10 months to be sure everything was covered before making the final distributions to the heirs.

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FIREchief
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Re: Estate Question

Post by FIREchief » Thu Jul 11, 2019 9:44 pm

JeffA wrote:
Thu Jul 11, 2019 2:38 pm
My brother and I are executors/beneficiaries of my Mom's Estate. Basically my Mom split our inheritance 60/40 between my brother and I (which is fine with me). My question is that because of that, how are all the Estate bills paid? (taxes owed/lawyers/capital gains etc.) Should the person inheriting more also pay the same ratio for all the expenses necessary to settle the Estate? Or does the Estate just pay all the bills and once it is settled, then the remainder is dispersed according to the terms of the will? Not much info about this on the internet,so just thought I would ask. Thanks!
Are you both executors? Does that mean that you both require your own attorney?
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

delamer
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Re: Estate Question

Post by delamer » Thu Jul 11, 2019 9:55 pm

I noticed that a couple posters used the term “final distributions” to heirs.

Does this mean that an executor could make a partial distribution earlier to the heirs? Let’s say there were two heirs each inheriting 50% of a $500,000 estate. Could the executor distribute a $150,000 to each heir shortly after the death and then distribute the remainder after one year when s/he is sure all claims against the estate and taxes have been paid?

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MP123
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Re: Estate Question

Post by MP123 » Thu Jul 11, 2019 10:26 pm

delamer wrote:
Thu Jul 11, 2019 9:55 pm
I noticed that a couple posters used the term “final distributions” to heirs.

Does this mean that an executor could make a partial distribution earlier to the heirs? Let’s say there were two heirs each inheriting 50% of a $500,000 estate. Could the executor distribute a $150,000 to each heir shortly after the death and then distribute the remainder after one year when s/he is sure all claims against the estate and taxes have been paid?
Yes, but it would be prudent to have a signed agreement that the first distribution was refundable in the event that claims against the estate exceded the remaining balance. Otherwise the executor might be on the hook for them.

Gnirk
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Location: Western Washington

Re: Estate Question

Post by Gnirk » Fri Jul 12, 2019 12:04 am

delamer wrote:
Thu Jul 11, 2019 9:55 pm
I noticed that a couple posters used the term “final distributions” to heirs.

Does this mean that an executor could make a partial distribution earlier to the heirs? Let’s say there were two heirs each inheriting 50% of a $500,000 estate. Could the executor distribute a $150,000 to each heir shortly after the death and then distribute the remainder after one year when s/he is sure all claims against the estate and taxes have been paid?
Yes, depending upon the circumstances. Because I managed my mother’s finances and health care for many years, I was aware of any and all expenses she might have after her death including attorney and CPA fees for filing her taxes. I made several partial distributions of her estate to the heirs over the course of six months. For example, her Vanguard holdings were transferred to the heirs as soon as possible. Some of her cash holdings were distributed the next month. Only after all expenses and taxes were paid did I make the final cash distributions. There was no real estate involved because I sold her home when she had to move to memory care. The biggest PITA were her paper EE bonds that didn’t have a beneficiary designation.

But it was still a lot of work!

delamer
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Re: Estate Question

Post by delamer » Fri Jul 12, 2019 9:10 am

MP123 wrote:
Thu Jul 11, 2019 10:26 pm
delamer wrote:
Thu Jul 11, 2019 9:55 pm
I noticed that a couple posters used the term “final distributions” to heirs.

Does this mean that an executor could make a partial distribution earlier to the heirs? Let’s say there were two heirs each inheriting 50% of a $500,000 estate. Could the executor distribute a $150,000 to each heir shortly after the death and then distribute the remainder after one year when s/he is sure all claims against the estate and taxes have been paid?
Yes, but it would be prudent to have a signed agreement that the first distribution was refundable in the event that claims against the estate exceded the remaining balance. Otherwise the executor might be on the hook for them.
That makes sense.

My thought was that it would be frustrating for the heirs to have to wait a year to receive any of their inheritance, so it would make sense to prudently distribute some money sooner if possible.

delamer
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Joined: Tue Feb 08, 2011 6:13 pm

Re: Estate Question

Post by delamer » Fri Jul 12, 2019 9:16 am

Gnirk wrote:
Fri Jul 12, 2019 12:04 am
delamer wrote:
Thu Jul 11, 2019 9:55 pm
I noticed that a couple posters used the term “final distributions” to heirs.

Does this mean that an executor could make a partial distribution earlier to the heirs? Let’s say there were two heirs each inheriting 50% of a $500,000 estate. Could the executor distribute a $150,000 to each heir shortly after the death and then distribute the remainder after one year when s/he is sure all claims against the estate and taxes have been paid?
Yes, depending upon the circumstances. Because I managed my mother’s finances and health care for many years, I was aware of any and all expenses she might have after her death including attorney and CPA fees for filing her taxes. I made several partial distributions of her estate to the heirs over the course of six months. For example, her Vanguard holdings were transferred to the heirs as soon as possible. Some of her cash holdings were distributed the next month. Only after all expenses and taxes were paid did I make the final cash distributions. There was no real estate involved because I sold her home when she had to move to memory care. The biggest PITA were her paper EE bonds that didn’t have a beneficiary designation.

But it was still a lot of work!
Thanks.

I was the executor of my mother’s estate and it is a lot of work.

But it was easier for me because I also was the sole heir, and all her assets were held at one local bank. But it still took almost 4 months to get the bulk of the assets into my name. I set up a small checking account in the estate’s name to cover any bills that I closed out about a year after her death when all the tax filings were done.

trueblueky
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Re: Estate Question

Post by trueblueky » Fri Jul 12, 2019 12:56 pm

Sorry for your loss. Were there no assets with POD/TOD? No life insurance or IRA with designated beneficiaries to transfer outside the will?

Freetime76
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Joined: Wed Jun 26, 2019 8:26 pm

Re: Estate Question

Post by Freetime76 » Sun Jul 14, 2019 10:10 pm

JeffA wrote:
Thu Jul 11, 2019 2:38 pm
My brother and I are executors/beneficiaries of my Mom's Estate. Basically my Mom split our inheritance 60/40 between my brother and I (which is fine with me). My question is that because of that, how are all the Estate bills paid? (taxes owed/lawyers/capital gains etc.) Should the person inheriting more also pay the same ratio for all the expenses necessary to settle the Estate? Or does the Estate just pay all the bills and once it is settled, then the remainder is dispersed according to the terms of the will? Not much info about this on the internet,so just thought I would ask. Thanks!
I am sorry for your loss. One of your sentences said “just” :) which usually means it’s more complicated in the long run, in my experience. Roughly, yes, in theory it should be similar either way.

You already have good advice in the replies, I’m another vote to handle expenses within the estate first, and later divide what is left 60/40. This will ensure that monies and assets are kept separate, which may help in taxes later, depending on what is in the estate. Estate items (personal property) and real property (if she owned a house) may need to be appraised to figure out what the estate is...

A lot of the details will depend on your mom’s state and maybe county of residence, as far as administration of the estate. As executor for my dad, I had no idea what to do. The library had a few books that gave me the gist of it, and yes, the internet, BUT the very best resource came from when I took the Will to the county Registrar to start the whole process. [the will had to be accepted, registered, and my appointment to be Personal Representative...had to be formally approved - basically, I had to take them the will and death certificate]. They gave me a whole packet of info with relevant websites and instructions for what had to be documented/turned in. Not sure if something similar is available in your area??

Again, some states/counties are more lax than others about timelines, due dates, and what you turn in. Also, please remember that it is probably easier to hold money/assets in the estate longer until expenses/taxes are done than to “re-extract” needed money from beneficiaries (you/your brother) after it’s already been used to pay off debts, for cars, vacations, etc. Creditors will have to be notified and paid off first, so It might make sense to distribute most of the funds after that time period is complete. Keep a little in reserve (in the estate) until just before estate is closed.
Apologies for rambling on.

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