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Author: SuzanneSLO One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121061  
Subject: Taxes withheld for Decedant Date: 3/24/2000 12:47 PM
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My father-in law passed away in 1999, leaving a very small estate for which no probate is required under state law. The beneficiaries are my husband and his brother. We filed (what we thought was) a final tax return for my FIL in 1999.

Last night, we received a check made payable to my FIL in connection with the de-mutualization of his life insurance company. In addition, the letter stated that an additional 31% had been withheld as Y2000 taxes. As this total $2000 in income is about all the income that came to him in 2000, we expect to get a 100% refund of the amount withheld if it is reported on his tax return (altho maybe we are wrong on this).

Do we file another final return for my FIL for 2000 on which we report all his 2000 income or should the income be reported equally on the returns of the 2 beneficiaries? If the latter, how do we get a refund for the withholding so that it can be distributed to the beneficiaries?

If it matters, we have distributed some, but not all of the assests of the estate at this time, but expect to have it all distributed in 2000.

Thanks for your help. -- Suzanne
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Author: TMFExRO Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 32506 of 121061
Subject: Re: Taxes withheld for Decedant Date: 3/24/2000 2:28 PM
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<< My father-in law passed away in 1999, leaving a very small estate for which no probate is required under state law. The beneficiaries are my husband and his brother. We filed (what we thought was) a final tax return for my FIL in 1999.

Last night, we received a check made payable to my FIL in connection with the de-mutualization of his life insurance company. In addition, the letter stated that an additional 31% had been withheld as Y2000 taxes. >>

My condolences on your loss.

The IRS is rumored to be really nasty (I never believed it for a minute), but even they don't expect dead people to pull themselves together sufficiently to file income tax returns. I'm going to assume that it was just some quirky timing that caused an insurance company to issue a demutualization payment to a deceased insured. That, or their recordkeeping really needs some help.

If indeed the payment was proper, the company needs to issue it to the party entitled to it. I can't say who that is, but I know it isn't your deceased father-in-law. You need to talk to the insurance company.

TMF ExRO
Phil Marti

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Author: SuzanneSLO One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 32520 of 121061
Subject: Re: Taxes withheld for Decedant Date: 3/24/2000 6:07 PM
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TMF ExRO: I actually spoke with a CSR at the Co. and they said that the policy beneficiary should just cash the check by presenting the death certificate. This part is not really a problem because of an existing joint bank account. It doesn't really solve the question of how to get the amount withheld back from the IRS.

Thanks for your help. -- Suzanne

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Author: TMFExRO Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 32528 of 121061
Subject: Re: Taxes withheld for Decedant Date: 3/24/2000 9:30 PM
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<< TMF ExRO: I actually spoke with a CSR at the Co. and they said that the policy beneficiary should just cash the check by presenting the death certificate. This part is not really a problem because of an existing joint bank account. It doesn't really solve the question of how to get the amount withheld back from the IRS. >>

I never thought there would be a problem cashing the check. What the CSR didn't address was the erroneous tax reporting that is bound to happen if they don't fix it.

You need to make sure that the insurance company reports the income as the beneficiary's; also the withholding. Get back in touch with them and tell them to correct their records. That way when they issue the 1099 next year, it will have the correct name and SSN on it.

TMF ExRO

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Author: elibortPrairiela One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 32647 of 121061
Subject: Re: Taxes withheld for Decedant Date: 3/27/2000 7:12 AM
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Aren't there several things that have to be done to straighten this out?

If everyone had done everything properly and on time, someone would have filed a death claim with the ins. co. and received the policy proceeds before the demutualization. That way there would have been tax-free proceeds to the bene. and no cash-in-lieu-of-stock (which is why there was withholding).

The poster is going to have to get the attention of someone else at the ins. co., someone who can see farther than cashing the check he's received.

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