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Best wishes to you. Suggest you post back in a year or so and share some of your experience and some thoughts on what to do and what to avoid, for the benefit of others.

BruceM


The first year anniversary of my sister's death is next week.

1.) Make certain that beneficiaries are current for all accounts that allow beneficiaries which includes all retirement accounts, pensions and life insurance.

2.) Consider a trust.

a.) Death isn't the worst situation. My MIL does have a trust and my husband is the successor trustee. She has severe dementia and hasn't been able to handle her affairs for several years. She resigned as trustee and signed a POA when she was still (barely) competent. It is easier to have a trustee resign than invoke the incompetency clause.

Establishing and maintaining a conservator-ship is extremely expensive and to be avoided if there are competent trustworthy family members.

b.) Probate in my area takes a minimum of a year. It took almost 3 months to obtain Letters of Administration. Fortunately, we have a family lawyer that is good and can be trusted.

c.) Probate is more expensive than a handling a trust.

d.) Probate may result in cleaner title than a trust. This statement was made by the retired financial adviser that leads a financial planning seminar for a local investment group to which I belong. I don't fully understand this statement but a probate judge would likely have authority to determine which claims are valid.

3.) Patience
It may take effort to track down administrators for accounts. Not immediately succeeding doesn't mean failure. Find out what is required for the next attempt and keep trying. Set a specific time limit for a response then follow up.

a.) The Administrator is not allowed to know who the beneficiaries are for retirement accounts. Providing the Letters of Administration and Death Certificate allowed one administrator to transfer the account to the estate but they would never make a statement to me that there was no beneficiary.

b.) 401K and IRAs are administered through separate organizations within the same brokerage.

i.) Provided Death Certificate and Letters of Administration to the retail broker. They said they would forward it to their 401K administrator.
ii.) After a week, I contacted the 401K administrator and ask if they had received the paperwork. The response was "We don't receive documents from the retail side."
iii.) Provided them with the documents.
iv.) Account was eventually moved to the estate EIN
v.) Ask the retail side if they had received information from the 401K side.
Their response was "We don't receive documents from the 401K side."

4.) Establish a relationship with a lawyer.
We have had a trust and wills. We been through handling my FIL's trust when he passed away. When events occur, it helps to have access to lawyer that you can trust.

When my FIL passed away, his lawyer had predeceased him. This was fortunate. I didn't like or trust his lawyer. My MIL didn't like the lawyer that took over. Not certain how the current lawyer was found. He handled my FIL's estate and has been handling stuff for my MIL and us since then. I had no hesitation to contact him when my sister unexpectedly passed away.

5.) Seek help from family and friends when overwhelmed. Hire help as needed.
My fractured elbow was indirectly a stress fracture. My sister was somewhere between a collector and a low level hoarder. I let the situation overwhelm me and took a hard fall on a tile floor (not at her house). My husband tore a muscle because he was frustrated at her stuff and tried to move something that was too heavy for him.

6.) NO DYI estate planning.
MIL's neighbor just passed away. There was an attempt at a trust but the signatures aren't correct. One of the son's is estranged from the family. One son is an alcoholic. They aren't friends. We are minimizing contact and don't ask questions. It is a mess.

A statement in the financial planning seminar my investment group hosts was "A bad will or trust is worse than none." Trying to avoid

7.) Auction houses
Mixed feeling regarding the success of sending stuff to auction. The fees are significant. It removed a room full of stuff from the house. The stuff was mostly low level collectibles. The stuff has sold but not at great prices. What it did give me was a good evaluation of what was worth selling and what can without guilt be donated.

The statement "What someone paid for an object has no relationship to its resale value." is mostly true. My sister bought art work from local artists. She liked the artwork and it was worth the price to her. It doesn't mean that there is a resale market for that art work. I sent email (through their website) to one of the artists explaining the situation and offering to give them the artwork. I never heard back from them.

8.) Social Security does not honor a POA or Trust
Making any changes for a family member who isn't competent is a problem. All we wanted to do was change my MIL's mailing address to ours. She is not able to appear at a Social Security office or sign if we arranged medical transport. We were told that my husband would have to take over essentially conservator-ship, establish a new and separate checking account for her, and be responsible for annual reports to Social Security.

The funny part is that we had put in a change of address for her. Social Security changed her mailing address based on the change of address with the Post Office.
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Distributions are tracked on a calendar year basis, regardless of the tax year of the reporting entity.

Generally speaking, any IRA/401K that becomes part of the probate estate is not eligible for RMD distributions, but must be fully distributed within 5 years. It doesn't matter how you time the distributions as long as they are completed timely.

Ira
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Distributions are tracked on a calendar year basis, regardless of the tax year of the reporting entity.

As I expected

Generally speaking, any IRA/401K that becomes part of the probate estate is not eligible for RMD distributions, but must be fully distributed within 5 years. It doesn't matter how you time the distributions as long as they are completed timely.

Ira


Timely meaning that the account is fully distributed within the five years will be easy. The accounts aren't large but I don't want to annoy the IRS.

This defintely lowers my stress level. The 401K and IRA were moved to the estate but there are still more forms to file to actually have any control of the investments or distributions. I am trying roll them over to my brokerage for easier management.

Probate should close in 2019. Average in this area is a year to a 18 months for probate.

Which means I only have to worry about is the RMD for the inherited IRA which is not part of probate. I don't have a December 2017 statement.
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Which means I only have to worry about is the RMD for the inherited IRA which is not part of probate. I don't have a December 2017 statement.

Unless you are the beneficiary of this account, you have nothing to do. (I haven't looked back over the thread, but) if you're the executor/administrator, all you have to do is notify the named beneficiary that s/he is the beneficiary of ABC account at XYZ. It is their responsibility to determine what distributions are required and to execute them. Your only responsibility might be to provide a death certificate.

Ira
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I don't have a December 2017 statement.

Should be able to get a statement from the broker holding the inherited IRA account. Mine(TDA) maintains an archive going back two or three years that's accessible for free. Its fee for(re)issuing older statements isn't large.

Eric Hines
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Unless you are the beneficiary of this account,

Yes, I am the beneficiary and it has been moved to an inherited IRA.
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Should be able to get a statement from the broker holding the inherited IRA account.

Hopefully, They will provide me with the December 2017 statement for my sister's account. It would be the basis for the RMD. If they don't, I'll make a guess and withdraw a little more than estimate.
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Should be able to get a statement from the broker holding the inherited IRA account.
---------------------------------
Hopefully, They will provide me with the December 2017 statement for my sister's account. It would be the basis for the RMD. If they don't, I'll make a guess and withdraw a little more than estimate.

================================
Well, if they don't, do you have some kind of statement for a 2018 period that shows YTD figures? If so, the opening figure in that column should work. It wouldn't necessarily have to be a January statement, either.

Bill, who spent 40 years working with missing numbers.
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Well, if they don't, do you have some kind of statement for a 2018 period that shows YTD figures?

Will try. Thank you for the suggestion.
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Bill, who spent 40 years working with missing numbers.

The information is on the March statement. It is frustrating that I didn't realize the information was obvious.

(Also, spent multiple decades working problems with incomplete information.)
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We had a few of these many years ago. Not sure if there's been some uniform probate adoption by the states to change this, but this was my experience.

First thing is to check with the IRA custodian. Their rules on intestate IRAs are the real driver. The custodian's procedures will depend partly on state probate laws and part on the company's policy...and I was surprised at how much of the process is simply the rules of the custodian.

If there was a beneficiary who predeceased the owner and no contingents, the custodian may simply allow the linear descendants of the owner be named equally....normally the adult children. If so, and they can be identified and named prior to Sept 30 of the year of death, then it should be treated as though they were the named beneficiaries all along and separate inherited accounts set up by 12/31 and directly transferred where they want it.If so, they would be responsible for any prorated undistributed RMDs, as I recall. And they can elect their distribution rate (life expectancy or 5 year rule). But if the will calls out something else...such as "my grandchildren equally", this may create an issue with the custodian.

The real challenge is if the custodian requires the estate be the beneficiary of the intestate IRA. If the owner died prior to the Required Beginning Date, then the IRA balance must come out not later than the end of the 5th year following the year of death. I've heard of custodians, many years ago, that required the estate be named beneficiary and dumped out the entire IRA into the estate...taxed at trust rates, in one year!! If death was on or after the RBD, the distributions must come out at least at the rate of the life expectancy of the decedent (had he survived). My experience has been that this is an expensive process and as you point out, time consuming in getting the court to appoint the beneficiaries.

And I've never heard of a custodian who couldn't produce last years IRA end-of-year statement. I mean, that's what they do...unless, I suppose, this is some fly-by-night outfit. At just about any custodian I've ever dealt with, all you have to do is produce the death certificate and letters testamentary naming you the the Estate Rep (Executor) and they should promptly provide you what you ask for.

Depending on the state, probate can be a real pain.

BruceM
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The real challenge is if the custodian requires the estate be the beneficiary of the intestate IRA. If the owner died prior to the Required Beginning Date, then the IRA balance must come out not later than the end of the 5th year following the year of death.

Exactly describes the situation.

And I've never heard of a custodian who couldn't produce last years IRA end-of-year statement. I mean, that's what they do...unless, I suppose, this is some fly-by-night outfit.

Last year's statement for the original IRA. I am certain they have it. Going in with an old IRA statement (for the account number), Letters of Administration, Death Certificate and patience would have probably been successful. It is so much less stressful not to need to do so.

Working on obtaining online administration access. I have a form to file but it may only give phone access. It is time to roll it over to my broker. Between our accounts and the estate accounts there are accounts at 7 different brokers.
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Working on obtaining online administration access. I have a form to file but it may only give phone access. It is time to roll it over to my broker. Between our accounts and the estate accounts there are accounts at 7 different brokers.

Wow! And I though working through one brokerage was a lot of work figuring them out.

Best wishes to you. Suggest you post back in a year or so and share some of your experience and some thoughts on what to do and what to avoid, for the benefit of others.

BruceM
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No. of Recommendations: 10
Best wishes to you. Suggest you post back in a year or so and share some of your experience and some thoughts on what to do and what to avoid, for the benefit of others.

BruceM


The first year anniversary of my sister's death is next week.

1.) Make certain that beneficiaries are current for all accounts that allow beneficiaries which includes all retirement accounts, pensions and life insurance.

2.) Consider a trust.

a.) Death isn't the worst situation. My MIL does have a trust and my husband is the successor trustee. She has severe dementia and hasn't been able to handle her affairs for several years. She resigned as trustee and signed a POA when she was still (barely) competent. It is easier to have a trustee resign than invoke the incompetency clause.

Establishing and maintaining a conservator-ship is extremely expensive and to be avoided if there are competent trustworthy family members.

b.) Probate in my area takes a minimum of a year. It took almost 3 months to obtain Letters of Administration. Fortunately, we have a family lawyer that is good and can be trusted.

c.) Probate is more expensive than a handling a trust.

d.) Probate may result in cleaner title than a trust. This statement was made by the retired financial adviser that leads a financial planning seminar for a local investment group to which I belong. I don't fully understand this statement but a probate judge would likely have authority to determine which claims are valid.

3.) Patience
It may take effort to track down administrators for accounts. Not immediately succeeding doesn't mean failure. Find out what is required for the next attempt and keep trying. Set a specific time limit for a response then follow up.

a.) The Administrator is not allowed to know who the beneficiaries are for retirement accounts. Providing the Letters of Administration and Death Certificate allowed one administrator to transfer the account to the estate but they would never make a statement to me that there was no beneficiary.

b.) 401K and IRAs are administered through separate organizations within the same brokerage.

i.) Provided Death Certificate and Letters of Administration to the retail broker. They said they would forward it to their 401K administrator.
ii.) After a week, I contacted the 401K administrator and ask if they had received the paperwork. The response was "We don't receive documents from the retail side."
iii.) Provided them with the documents.
iv.) Account was eventually moved to the estate EIN
v.) Ask the retail side if they had received information from the 401K side.
Their response was "We don't receive documents from the 401K side."

4.) Establish a relationship with a lawyer.
We have had a trust and wills. We been through handling my FIL's trust when he passed away. When events occur, it helps to have access to lawyer that you can trust.

When my FIL passed away, his lawyer had predeceased him. This was fortunate. I didn't like or trust his lawyer. My MIL didn't like the lawyer that took over. Not certain how the current lawyer was found. He handled my FIL's estate and has been handling stuff for my MIL and us since then. I had no hesitation to contact him when my sister unexpectedly passed away.

5.) Seek help from family and friends when overwhelmed. Hire help as needed.
My fractured elbow was indirectly a stress fracture. My sister was somewhere between a collector and a low level hoarder. I let the situation overwhelm me and took a hard fall on a tile floor (not at her house). My husband tore a muscle because he was frustrated at her stuff and tried to move something that was too heavy for him.

6.) NO DYI estate planning.
MIL's neighbor just passed away. There was an attempt at a trust but the signatures aren't correct. One of the son's is estranged from the family. One son is an alcoholic. They aren't friends. We are minimizing contact and don't ask questions. It is a mess.

A statement in the financial planning seminar my investment group hosts was "A bad will or trust is worse than none." Trying to avoid

7.) Auction houses
Mixed feeling regarding the success of sending stuff to auction. The fees are significant. It removed a room full of stuff from the house. The stuff was mostly low level collectibles. The stuff has sold but not at great prices. What it did give me was a good evaluation of what was worth selling and what can without guilt be donated.

The statement "What someone paid for an object has no relationship to its resale value." is mostly true. My sister bought art work from local artists. She liked the artwork and it was worth the price to her. It doesn't mean that there is a resale market for that art work. I sent email (through their website) to one of the artists explaining the situation and offering to give them the artwork. I never heard back from them.

8.) Social Security does not honor a POA or Trust
Making any changes for a family member who isn't competent is a problem. All we wanted to do was change my MIL's mailing address to ours. She is not able to appear at a Social Security office or sign if we arranged medical transport. We were told that my husband would have to take over essentially conservator-ship, establish a new and separate checking account for her, and be responsible for annual reports to Social Security.

The funny part is that we had put in a change of address for her. Social Security changed her mailing address based on the change of address with the Post Office.
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The Administrator is not allowed to know who the beneficiaries are for retirement accounts. Providing the Letters of Administration and Death Certificate allowed one administrator to transfer the account to the estate but they would never make a statement to me that there was no beneficiary.
================================
That sounds very strange. A retirement plan administrator may be either an official at the employer company, or a firm administering the plan on an outsourced basis, but in either case the plan administrator is who the original beneficiary designations have to go to when signed by the employee/participant. And when I've called them they were able to tell me what their records showed for beneficiaries. Fortunately my sister had Dad update his accounts for that after Mom died. I went through this multiple times when my father died in 2016, and more recently when my daughter died this year, so my memory is fairly fresh on the subject.

Generally, the process a beneficiary does to get a retirement plan is very similar to a life insurance claim process. And when there are multiple beneficiaries, the quickest and smoothest procedure is for each beneficiary to complete and sign a claim form, and submit them together with the death certificate (that way they're only looking for one)and any other required documentation.

But it sounds like your situation, the beneficiary designation either wasn't made or was defective in some other way, or you wouldn't have had to put it into probate.

Bill
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I read the post as saying the estate administrator couldn’t get the beneficiary names from the plan administrator.

—Peter
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The Administrator is not allowed to know who the beneficiaries are for retirement accounts

Peter is correct. It is the estate Administrator that isn't allowed to know the beneficiaries for the account.

It is the responsibility of the estate Administrator to notify retirement plan Administrator's. If a beneficiary is specified, the plan Administrator contacts the beneficiary. I just found it strange that as the estate Administrator, I wasn't allowed to know if a beneficiary was even specified. Transferring the IRA to the estate EIN means that there wasn't a beneficiary but they still wouldn't state that there was no beneficiary specified.
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It is the responsibility of the estate Administrator to notify retirement plan Administrator's. If a beneficiary is specified, the plan Administrator contacts the beneficiary. I just found it strange that as the estate Administrator, I wasn't allowed to know if a beneficiary was even specified. Transferring the IRA to the estate EIN means that there wasn't a beneficiary but they still wouldn't state that there was no beneficiary specified.
=================================
Ok. But I never had that problem. Of course, I was dealing with cases where there were designated beneficiaries, and I was calling as both the personal rep of the estate and as a beneficiary myself.

Bill
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Some comments on vkg's post:

b.) Probate in my area takes a minimum of a year. It took almost 3 months to obtain Letters of Administration. Fortunately, we have a family lawyer that is good and can be trusted.

c.) Probate is more expensive than a handling a trust.


Both of these statements are entirely dependent on the state where the decedent lived. If the state has "difficult" probate processes (like yours), a trust is simpler and cheaper. If the state has "easy" probate, the trust can be more expensive.

a.) The Administrator is not allowed to know who the beneficiaries are for retirement accounts. Providing the Letters of Administration and Death Certificate allowed one administrator to transfer the account to the estate but they would never make a statement to me that there was no beneficiary.

b.) 401K and IRAs are administered through separate organizations within the same brokerage.


I have never had a problem getting the names of the designated beneficiaries, even in a situation where I wasn't the official Administrator. (I was the contingent Administrator, the primary Administrator had declined to serve. I was awaiting official appointment as nine months after death approached, and needed the information to prepare disclaimers.) This reinforces your earlier point to make sure beneficiary designations are up-to-date.

I have found that the handling of IRAs and 401Ks after death is usually done by the same department - one that specializes in estate/decedent issues.

i.) Provided Death Certificate and Letters of Administration to the retail broker. They said they would forward it to their 401K administrator.

I only contact retail broker to determine who to contact at Corporate. Or I call the 800 number on the broker's website and work through their customer support team.

4.) Establish a relationship with a lawyer.
We have had a trust and wills. We been through handling my FIL's trust when he passed away. When events occur, it helps to have access to lawyer that you can trust.


Can't emphasize that too much! It can also help if the decedent had a relationship with a lawyer. When my brother died in MA, where he had lived for over 30 years, my attorney contacts were in NY and NJ (where I have lived my adult life). Fortunately, the lawyer that handled his condo closing in 1983 and his wills in 1998 and 2011 was still in practice. He was the obvious choice to handle probate.

Ira
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Some comments on vkg's post:

b.) Probate in my area takes a minimum of a year. It took almost 3 months to obtain Letters of Administration. Fortunately, we have a family lawyer that is good and can be trusted.

c.) Probate is more expensive than a handling a trust.

Both of these statements are entirely dependent on the state where the decedent lived. If the state has "difficult" probate processes (like yours), a trust is simpler and cheaper. If the state has "easy" probate, the trust can be more expensive.


It depends is always a safer answer.

There are a number of steps in probate that require specific wait times. My father's probate which was done in another state was quicker. His lawyer who was local handled it. It was cheaper and faster than the current probate.

b.) 401K and IRAs are administered through separate organizations within the same brokerage.

I have never had a problem getting the names of the designated beneficiaries, even in a situation where I wasn't the official Administrator. (I was the contingent Administrator, the primary Administrator had declined to serve. I was awaiting official appointment as nine months after death approached, and needed the information to prepare disclaimers.) This reinforces your earlier point to make sure beneficiary designations are up-to-date.

I have found that the handling of IRAs and 401Ks after death is usually done by the same department - one that specializes in estate/decedent issues.

i.) Provided Death Certificate and Letters of Administration to the retail broker. They said they would forward it to their 401K administrator.

I only contact retail broker to determine who to contact at Corporate. Or I call the 800 number on the broker's website and work through their customer support team.


This was my first time of handling a 401K in probate. Finding the corporate rep was the first milestone. Then the corporate rep flat told me that they would not tell me even if a beneficiary was specified. The contact point to have the 401K moved to the estate was corporate. I was prevented from contacting the estate department of the broker until after corporate had arranged the authorization to transfer it to the estate EIN. Many companies may make the process easier. This one didn't.

Adding one more point:
When specifying beneficiaries make certain you know the name they are using. I didn't change my name when I married. My sister decided that I had. It was another set of paperwork because the beneficiary name was not a name that I had ever used. My SSN was specified correctly which did help.
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4.) Establish a relationship with a lawyer.
We have had a trust and wills. We been through handling my FIL's trust when he passed away. When events occur, it helps to have access to lawyer that you can trust.


This cannot be overemphasized.

My mother had a very good lawyer, a member of the trust and wills department at the law office.
After my mother died, we also got Elliot Spitzer to help out; he was the attorney general of the State of New York at the time.

My mother's will was quite simple (about four pages) dividing her estate into four equal pieces, one to each of her three children, and one to her church. None of us disagreed with any of it. But the corrupt probate court judge declared my mother had died intestate on the grounds that the witnesses were not present when my mother signed the will. The witnesses were still alive and filed affidavits declaring that they were present when my mother signed the will, and the notary who notarized the will declared that she was present when all the others were there. The judge ignored that, appointed the daughter of a friend of hers to be the administrator of the will. And state law gave the administrator no options: the estate had to be divided in three equal parts, one to each of my mother's children, and the church got nothing. And the administrator was to get $20,000 for her trouble.

Now the attorney general has lots of authority in such matters when one of the beneficiaries is a charity, and is automatically an attorney for the charity. He said as far as he was concerned, the will was perfectly valid. So my mother's attorney (who was to have been the executor) and Spitzer's office came to an agreement whereby my sisters and I each got 1/3 of the estate, but we signed a binding agreement to give 1/4 of our inheritances to the church. It took about a year to straighten it all out. The judge did this for lots of cases, and Spitzer was really pissed. I hope he found a way to get that judge impeached.
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The judge did this for lots of cases, and Spitzer was really pissed. I hope he found a way to get that judge impeached.

The probate process has been slow and not cheap but at no point has there been any question of corruption.
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Another detail.

The house is being reappraised from the date of death to the date of sale. In California, a sibling cannot retain the property tax bases. Within the next couple of weeks, the estate will receive a bill for the additional property taxes. I have vague memories that my lawyer probably said this would happen. If the estate refused or was unable to pay the additional tax bill, it could be a problem for the executor and new owner.

I did let my real estate agent and the title company know about the additional assessment. I am surprised that the title company didn't know this would happen.
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vkg: "Another detail.

The house is being reappraised from the date of death to the date of sale. In California, a sibling cannot retain the property tax bases[basis?]. Within the next couple of weeks, the estate will receive a bill for the additional property taxes. I have vague memories that my lawyer probably said this would happen. If the estate refused or was unable to pay the additional tax bill, it could be a problem for the executor and new owner.

I did let my real estate agent and the title company know about the additional assessment. I am surprised that the title company didn't know this would happen."


Color me confused, but why will the estate owe more?

I am assuming that the California reference is to Prop. 13 and ad valorem real estate taxes and not income taxes from the sale of the property.

Can you elaborate?

Curiously, JAFO
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Color me confused, but why will the estate owe more?

Since I'm in CA, let me take a shot at that.

Yes, it has to do with Prop 13. Under Prop 13, only certain heirs can retain the decedent's property tax base. As noted, siblings are not one of the approved heirs. (Children can inherit and keep the property tax base.)

So as of the date of death, the property taxes increase (I'm assuming an increase in value of the property while the decedent owned it rather than a decrease) because a sibling is the heir. Of course, it takes some time for the county assessor to learn of the death, find out who the heirs are, then value the property for property tax purposes. That new tax valuation and date is then passed on to the county tax collector who calculates the new tax and sends the bill to the owner. In CA, these are called supplemental assessments. They supplement the original tax bill.

It does not surprise me that vkg was able to sell the house before the supplemental assessment was finalized and issued. For more routine sales, it can take many months to get the supplemental assessment. I would not be surprised if a supplemental assessment for a transfer at death takes longer, since the assessor needs to gather more information than for a routine sale.

In this particular case, it sounds like the supplemental assessment will cover the period from the date of death (when the tax base increased) to the date of sale (when the subsequent buyer will get their own assessment based on the price paid for the property). Her wording isn't the best, but I think I recognize the gist of the issue.

Like her, I am surprised that the title company who issued the title insurance policy for the benefit of the buyer and/or lender didn't insist on a provision for this supplemental assessment in the sale closing. If they didn't do so, they could certainly be on the hook for the assessment. It does sound like vkg is planning to do the right thing and pay the supplemental property tax assessment - which she would have done in the sale closing had everyone been on the ball. Then again, perhaps a close look at the closing settlement statement will show that those taxes were provided for in the closing. There's no way to know for sure without seeing the complete settlement statement and understanding each line on it.

--Peter
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Since I'm in CA, let me take a shot at that.

Yes, it has to do with Prop 13. Under Prop 13, only certain heirs can retain the decedent's property tax base. As noted, siblings are not one of the approved heirs. (Children can inherit and keep the property tax base.)

So as of the date of death, the property taxes increase (I'm assuming an increase in value of the property while the decedent owned it rather than a decrease) because a sibling is the heir. Of course, it takes some time for the county assessor to learn of the death, find out who the heirs are, then value the property for property tax purposes. That new tax valuation and date is then passed on to the county tax collector who calculates the new tax and sends the bill to the owner. In CA, these are called supplemental assessments. They supplement the original tax bill.

It does not surprise me that vkg was able to sell the house before the supplemental assessment was finalized and issued. For more routine sales, it can take many months to get the supplemental assessment. I would not be surprised if a supplemental assessment for a transfer at death takes longer, since the assessor needs to gather more information than for a routine sale.


The assessor hadn't be notified because I didn't realize that the property would be reassessed during probate. I have a vague memory that my lawyer may have told me but at the time I was seriously overwhelmed. I had asked the title company before escrow opened if there would be a reassessment but was told there wouldn't be an issue. The title company was wrong.

Maybe I should have been more assertive but for the estate the results will be the same. I notified our real estate agent and she notified the title company. Our real estate agent hasn't handled many probate sales but I am surprised that the title company wasn't aware of the issue. I don't expect anything from our real estate agent or title company. It was for their information to avoid future problems.

In this particular case, it sounds like the supplemental assessment will cover the period from the date of death (when the tax base increased) to the date of sale (when the subsequent buyer will get their own assessment based on the price paid for the property). Her wording isn't the best, but I think I recognize the gist of the issue.

Yes

Like her, I am surprised that the title company who issued the title insurance policy for the benefit of the buyer and/or lender didn't insist on a provision for this supplemental assessment in the sale closing. If they didn't do so, they could certainly be on the hook for the assessment. It does sound like vkg is planning to do the right thing and pay the supplemental property tax assessment - which she would have done in the sale closing had everyone been on the ball. Then again, perhaps a close look at the closing settlement statement will show that those taxes were provided for in the closing. There's no way to know for sure without seeing the complete settlement statement and understanding each line on it.

--Peter


Taxes paid in escrow were based on my sister's assessment and not the estate's. I have spoken with the assessor's office and it is a valid additional tax bill. The notice of proposed assessment was sent a little over a month after the sale closed. In the next two weeks, I should receive the bill.

I might be able to argue a slightly lower assessed value because of the condition of the property, but the appraisal for the estate is 10% higher than the proposed evaluation. This is an argument that I might win but result in a bigger loss.
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Taxes paid in escrow were based on my sister's assessment and not the estate's.

Just for completeness, if everything had been done the way I think it should have been done, there would be as many as three line items for property taxes in the closing settlement. One is the one you mention - a proration of the current tax bill between the buyer and seller.

A second might be your payment of the current tax bill. That may or may not be there depending on if there was an unpaid ordinary tax bill due at the time escrow closed. In CA, property taxes are due on Nov 1 and Feb 1, and are late on Dec 10 and April 10. If you close escrow near those dates and have not yet paid the tax bill, you will have to pay them through your sale escrow.

But there might be one more line - probably mentioning additional taxes retained in escrow for supplemental taxes. It's worth another look at the closing settlement statement to see if that is there. I'd put the odds at 50/50. I would not be surprised either way. If you do happen to find a line item for something like this, I'd get in touch with whoever is holding the funds for the taxes to see how to get those funds released - either to the tax collector or to the estate.

From my mostly lay understanding, the actual tax attaches to the property and not to any individual or entity. If you wanted to be a jerk, you could refuse to pay the bill and the current owner would be liable for it. They would then get in touch with their title insurer and ask them to pay it under the terms of the title insurance policy. If they agree it fits the terms of the policy, the insurer would pay the bill. But they might also get the right to look to the estate for payment of the taxes (and added costs) as a civil matter between two parties. If the estate had already been closed without knowing about this bill, things could get really messy.

Fortunately for everyone, you already know about the bill and the estate has not yet been closed. I also suspect you have a near-zero score on the jerkness scale and would never consider skipping out on a legitimate tax bill. :)

--Peter
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Peter -

The only tax entry on the Settlement form is for County property taxes from 07/01/2018 through date of sale. The amount is a pro-rated amount for that time frame.

The other "taxes" are county and city transfer fees.

Closing was well before the late date for property taxes. I didn't see any reason not to let them be paid in escrow.
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The only tax entry on the Settlement form is for County property taxes from 07/01/2018 through date of sale. The amount is a pro-rated amount for that time frame.

Just for completeness again, that's actually a proration between you and the buyer. It's not a payment to the tax collector. Because the buyer will own the property when the taxes become due, the buyer is responsible for the full amount of the tax bill even though they didn't own the property for the full period of time covered by the tax bill. To make things equitable between the buyer and seller, you as the seller are giving the buyer money for the taxes during the time you owned the property. (Substitute "the estate" for "you" as necessary.)

I have no doubt you have read the settlement statement correctly. I'm mostly pointing things out for the benefit of lurkers and others reading through this thread. (And a slim hope that perhaps you missed something earlier.)

--Peter


PS for those who care about the minutiae. In CA, annual property taxes are for the period from July 1 through June 30 of the next year. They are often referred to as something like the 2018/2019 tax bills (which are the current year bills as of the time I'm typing.) The first installment is due Nov 1 and covers the time from July 1 through Dec 31. The second installment is due Feb 1 and covers the period from Jan 1 through June 30.
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Just for completeness again, that's actually a proration between you and the buyer. It's not a payment to the tax collector. Because the buyer will own the property when the taxes become due, the buyer is responsible for the full amount of the tax bill even though they didn't own the property for the full period of time covered by the tax bill. To make things equitable between the buyer and seller, you as the seller are giving the buyer money for the taxes during the time you owned the property. (Substitute "the estate" for "you" as necessary.)

The 2018/2019 tax bill had been issued before escrow closed. I believe, that the 1st installment was paid from buyer's settlement.
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ptheland:

Moi: <<<Color me confused, but why will the estate owe more?>>>

"Since I'm in CA, let me take a shot at that."

Peter, thank you. This post and one of your follow-ups cleared it up for me. California real estate taxes are simply very different than Texas.

"Yes, it has to do with Prop 13. Under Prop 13, only certain heirs can retain the decedent's property tax base. As noted, siblings are not one of the approved heirs. (Children can inherit and keep the property tax base.)"

I was aware that only certain people inherited the Prop. 13 value.

"So as of the date of death, the property taxes increase (I'm assuming an increase in value of the property while the decedent owned it rather than a decrease) because a sibling is the heir."

This would never be an issue in Texas under currently rules. In Texas, properties taxes are based on the value as of January 1, and a subsequent death during the year would not change the assessment. Properties are assessed in the winter/early spring, valuation notices go out, there is a deadline for filing a challenge to the assessed value (May 31, IIRC), protest hearings are held, the Appraisal District certifies value to the various taxing authorities in early fall, the taxing authorities then set their respect tax rates, tax bills are distributed and taxes can be paid between November 1 and January 31 of the following year without be delinquent. Texas does nto have Prop. 13, but we do have homestead exemptions and if the 1/1 Owner had the exemption, then dies in March, and the estate sold the property there would be no re-assessment for such calendar year.

" . . . .

Like her, I am surprised that the title company who issued the title insurance policy for the benefit of the buyer and/or lender didn't insist on a provision for this supplemental assessment in the sale closing. If they didn't do so, they could certainly be on the hook for the assessment. It does sound like vkg is planning to do the right thing and pay the supplemental property tax assessment - which she would have done in the sale closing had everyone been on the ball. Then again, perhaps a close look at the closing settlement statement will show that those taxes were provided for in the closing. There's no way to know for sure without seeing the complete settlement statement and understanding each line on it."


I agree it seems odd that the title company would miss it.

"PS for those who care about the minutiae. In CA, annual property taxes are for the period from July 1 through June 30 of the next year. They are often referred to as something like the 2018/2019 tax bills (which are the current year bills as of the time I'm typing.) The first installment is due Nov 1 and covers the time from July 1 through Dec 31. The second installment is due Feb 1 and covers the period from Jan 1 through June 30."

Thank you for the minutiae, too.

Regards, JAFO
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California real estate taxes are simply very different than Texas.

I've always thought Texas real estate taxes are very different than California's. I guess we're both right. ;-)

This would never be an issue in Texas under currently rules. In Texas, properties taxes are based on the value as of January 1 ...

Yes. This is a fallout of our Prop 13. Under Prop 13, the assessed valuation for property taxes cannot increase more than 2% per year. Because of that, and a real estate inflation rate which is more than 2%, CA properties are typically valued for property taxes at an amount less than their current FMV. But Prop 13 requires a re-assessment to the current FMV any time ownership of the property changes. That brings values back up to current values.

So while our general valuation date is also Jan 1 of each year, property is re-valued whenever the ownership changes. (Gotta get the valuation up as soon as possible to increase tax receipts!) Of course, exceptions to this re-valuation have been carved out over the years. And that is what leads to threads like this one.

--Peter
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As Columbo says "Just one more thing" actually two

10.) Cars
This is one of the first items the lawyer wanted handled and removed from the estate. Cars have liability. They can be stolen or if driven can be involved in collisions. In this case, it wasn't possible to store it in a garage.

Also, vultures come out of the woodwork thinking that they can get the car cheap. The most brazen request was wanting to borrow the car to drive to Oregon.

11.) Insurance
Insuring a vacant house can be complicated. The property closed just before the umbrella policy was to expire. The insurance company was declining to renew the umbrella policy. Since it was in escrow at the time of the notice, I didn't investigate why they were denying renewal.
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