Q: Our father passed last June, and my brother is executor. My sister handled disbursing the IRA split 5 ways. The executor filled out the PA-REV 1500 inheritance tax form and put an estimate which was $260 under. Is that a red flag? Also does the executor need to have a separate bank account from which to pay the inheritance tax or can it be paid from his personal bank account? (Pittsburgh, PA)
A: The correct way to value assets on the PA inheritance tax return is to obtain the correct date of death value from the financial institution. When the PA Department of Revenue audits the return, it is possible that they will detect the difference and when they issue their Notice of Appraisement, they will require extra tax to be paid, if the asset is in fact undervalued. There is a bit of confusion as to what is going on here. Are there other estate assets? Is there a will and if so does it permit inheritance tax owed on non-probate assets to be paid from probate money? If this IRA is the only asset, inheritance tax can be paid by one heir, two heirs, or all heirs from their personal accounts. As long as it is paid, the DOR does not care by whom. I would pay for a consultation with an estate attorney to make sure you are doing this correctly and if it is determined that you are not, let the attorney handle this. You have potential income tax issues with any IRA. It may be beneficial to the heirs to pass the income tax on this IRA to the heirs to report on their individual income tax returns instead of accounting for income on the estate 1041 and paying the much higher tax rate.
Q: My mother passed and my sister is the executor. There was an IRA that was split between us. I gave my half to my sister to pay debts and taxes. The total in debts that I know of are close to what was in the IRA after taxes were paid. There later was revealed a pension that was left to only me. If the total debts exceed what was in the IRA does the pension that was left to me then become part of the estate to pay these debts or would tangible items then need to be sold off by the estate to pay these additional debts? (Greentree)
A: I do hope you have an attorney to guide you through this. Generally, assets such as IRA’s, pension plans, insurance policies, and annuities with living beneficiaries are not considered to be part of the estate. They are often termed “non-estate” or “non-probate” assets. Only assets held in the name of the decedent only, comprise estate or probate assets. A creditor to whom money is owed can file a claim against estate assets once an estate is opened. However, such creditor generally cannot reach these non-probate assets. I would need to know what other estates and debts exist to advise if it is warranted to even open an estate. If an estate is opened and insufficient estate assets exist to pay estate expenses and debts, the estate is considered to be insolvent and creditors would be paid so many cents on the dollar. In that case, the estate may need to be closed by the filing of a First and Final Account. Bear in mind, you and your sister will need to pay inheritance tax regardless if an estate is opened or not. You really need to sit down with an attorney and have him or her look at all assets, debts and expenses before an informed opinion can be given.
Q: My sister is the executor and per the will she is to receive everything yet my name is listed as a 50-50 beneficiary on her retirement and life insurance. Debt on estate is about 100k. There is 160k in IRA account which I signed over my half to my sister. There is10k in life insurance of which I was sent 5k. My sister is asking for $1500 of that for funeral expenses. We are a month and a half into this and now there apparently was another retirement account that I am listed as the sole beneficiary of $37k. Why am I receiving these funds and why aren’t they going to the estate and then my sister as heir? Below is the distribution part of the will. A) I give such items of my tangible personal property as are designated in a separate writing signed by me which refers to this will to the individual (s) named therein who survive me. B) I give the balance of my tangible personal property (or all such tangible property if no writing exists) to my daughter (my sister) if she survives me. If my daughter fails to survive me I give the balance of my tangible personal property to my son (me), if he survives me. (Glenshaw, PA)
A: Normally, if an attorney was handling this estate, your questions would be answered. Generally, some assets such as insurance policies, IRA’s, annuities, etc., have beneficiaries. Upon the death of the owner, the asset passes directly to the named beneficiary. The asset does not go into nor is it part of the estate. These types of assets are considered “non-probate”, as opposed to probate. An example of a “probate” asset would be something held in the decedent’s name at death, with no listed beneficiary. For example, a house with the decedent named on the deed. A car with the decedent named on the title. Beware, you may owe inheritance tax on some of these “non-probate” assets that you are inheriting. If you don’t have an attorney, and your sister is the brains behind this, I strongly suggest that you hire one.
Q: Can an estate administrator defraud a sole beneficiary of an IRA account mom left her by telling her that monies HAVE to go into the estate account. The beneficiary can prove she’s sole beneficiary of the account and can prove the administrator told her it had to go into estate. Can administrator use the “I didn’t know it didn’t need to go through estate” as a defense? Is ignorance a defense? Or, isn’t that her fiduciary responsibility as administrator to KNOW what accounts are placed in estate or not
A: Yes, she should know. If an attorney was representing the administrator, this wouldn’t have happened. I find it highly unusual that a financial company would pay out a claim to and estate when there was a beneficiary listed on the IRA. It is highly unusual. You may want to hire an attorney to inquire and/or file a petition for a court accounting.