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I have questions on estate planning, particularly with regard to IRAs.

I've read that all types of IRAs are part of the estate.

To create a hypothetical example, assume the estate tax exemption is $5 mil and you have $5 mil in a TIRA and $5 mil in a Roth; there are no other assets. For simplicity, assume the estate tax is 40% on the amount above $5 mil. FWIW I am not even close to these totals, but I can dream!

Questions:

Am I correct that the estate will owe $2 mil in estate tax?

But what about having to withdraw money from one of the IRAs to pay that tax? If you withdraw from the Roth, I assume no more tax is owed. But what if you withdraw from the TIRA (for example if that is the only type of IRA so you have no choice)? Does the estate need to pay tax on that withdrawal, as well as the estate tax? If so, should the estate do the withdrawal first, including paying the tax owed on it, which then reduces the estate, and the corresponding estate tax?

Are there ways to shelter the IRAs from some or all of the estate tax? I know you can't put an IRA into a trust, but was wondering if there is anything else you can do. It seems like the tax hit on both withdrawals and the estate become egregious.
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With regard to Estate Tax, an IRA is an asset just like any other asset. What will be important for your questions is whether the IRA accounts have named beneficiaries or if the Estate is the beneficiary (named or unnamed).

If the Estate is the beneficiary, then the Executor will have to take a $2M distribution to pay the Estate Tax. To the extent the distribution is subject to income tax (TIRA), the Estate will also need to file an Estate Income Tax return and pay the income tax (somewhat north of $700K).

If the accounts have named beneficiaries (other than the Estate), then the accounts transfer outside of probate and there will be no assets to pay the Estate Tax. The IRS will then go after the named beneficiaries for the Estate Tax. (I don't know if the Estate Tax liability is considered "joint and several" which means the IRS can go after any beneficiary for the full amount of the tax owed). Again, any distribution from the IRA that would be taxable to the beneficiary will be subject to income tax.

While it may seem egregious to tax these accounts twice, it isn't any different from any other income producing asset in an estate. It gets taxed as corpus of the Estate and as income when the income is recognized for tax purposes.

There is a bit of relief because the taxpayer can use a portion of the Estate Tax to reduce the amount of the distribution subject to income tax.

Ira
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Thanks Ira.

Assume the IRAs have named beneficiaries. It looks like they will have a combined average tax rate of 54+% on the $5 mil exceeding the estate tax exemption (excluding the "bit of relief" you mention). And then as much as 40% on the remaining funds when they are withdrawn.

Any comments on sheltering IRAs? Or is it impossible?

If you have a situation similar to this, it seems like it would make sense to withdraw a substantial sum from the IRAs prior to death (if only we knew when we were going to die!) and pay the income tax, thus reducing the estate (and the eventual estate tax).

I wonder how Peter Thiel and others with "excessive" IRAs are thinking about this, lol. I was also thinking of Weschler, one of BRK's investment managers. He did a ROTH conversion from a TIRA "in nine figures", paying $29 mil in tax. I don't know why the tax rate was so low (at most 29%). But regardless of the rate, maybe that was done now to reduce the size of the estate?
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If you have a situation similar to this, it seems like it would make sense to withdraw a substantial sum from the IRAs prior to death (if only we knew when we were going to die!) and pay the income tax, thus reducing the estate (and the eventual estate tax).

Unless you spend that money that you have withdrawn from the IRA, it is still your property and therefore still part of the estate and taxed as noted. It's just not in the IRA and in another taxable account instead whether that is your brokerage account or your checking account.
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What about Roth conversions. Donation of stock to a charity could create a deduction that would cover the taxes due on a partial Roth conversion.

They are talking about an income limit on Roth coversions, but no limit as of now.
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Unless you spend that money that you have withdrawn from the IRA, it is still your property and therefore still part of the estate and taxed as noted.

And there is one significant bit of spending there. The income taxes on the withdrawal.

If you withdraw a chunk of money from your IRA and pay the income taxes, you have reduced your estate by the amount of those income taxes. Then you also get the money into investments that will get a step up in basis at your demise. It's basically fully paying the income taxes on that money now instead of after your death.

For significant estates with significant assets in an IRA (or 401K or 403B) it's something to consider. It may not always be the right thing to do, but it needs to be thought through.

--Peter
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I've read that all types of IRAs are part of the estate.

If your wife is your primary beneficiary and your kids are contingent beneficiaries, if both you and your wife die, the IRA goes to the contingent beneficiaries without regard to your will. So, the IRA money transfers outside of probate, without whatever restrictions are in your will, etc.

401k's are different because they're retirement assets, so if you have, say, wife #2 and your kids (from deceased wife #1) are your primary beneficiaries, wife #2 still could get the 401k if she didn't sign the proper paperwork (and it has to be AFTER you got married).
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There are two different estates. You have a tax estate (i.e., the portion of your estate subject to Federal and state estate taxes -- IRAs get taxed). And a probate estate (i.e., the portion of your estate that gets sent through the county courthouse (fees and expenses apply) for disposition to your heirs.

With proper planning (i.e., making sure you have stated beneficiaries for IRAs, CDs, and brokerage accounts as well as transferring any real estate you own through a revocable trust) you can make the probate estate disappear and avoid all the fees.

intercst
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I know the IRAs don't go through probate, but I thought pretty much everything else does, unless it is in a trust.

I think one strategy for a married couple is to divide the assets into two trusts, one for each spouse. That way when one spouse dies, his/her estate tax exclusion stays with the trust. If the estate tax starts at $5 mil, this is a way to shelter $10 mil. This assumes the surviving spouse is the beneficiary in the will and the trust. I know this strategy was allowed a few decades ago (my in-laws did it), but not sure today. But again, unfortunately you cannot put IRAs into trusts.

It looks like the "too big" IRA problem is partially handled by 1) withdrawing assets before death to minimize estate taxes; or 2) charitable giving.
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I know the IRAs don't go through probate, but I thought pretty much everything else does, unless it is in a trust.

</snip>


Not at all. You can have a "Transfer on Death" agreement with a brokerage firm that avoids probate on a taxable account. Similarly, you can title a bank CD as "John Doe, payable on death (POD) to Mary Smith" to avoid probate on that. Anything in your will goes through probate, but the idea is to transfer as much as possible outside of the will.

Here's the Transfer on Death agreement at Vanguard.

https://investor.vanguard.com/beneficiaries/nonretirement

intercst
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Anything in your will goes through probate, but the idea is to transfer as much as possible outside of the will.

I'm not sure why everyone is so terrified of probate, though I realize this may not be your opinion and you are just responding to others in the thread. I will say that if everything passes outside of probate, then there's nothing left in the estate to pay for things like estate taxes, final expenses, or remaining debts, and that can cause all sorts of headaches.

DH's aunt tried some DIY estate planning and left the bulk of her estate, which was well in excess of $750k, to one grand-niece via a TOD account. The rest of her estate consisted of her car, the condo, another house jointly owned with a sister in a Medicaid-funded nursing home, and about $11 in her checking account. No, that is not a typo. Oh, there was a life insurance policy with her executor as the beneficiary. So here's how it shook out - the grand-niece was the daughter of the executor, so although the executor could have clawed back some of the money in that TOD account to pay the estate taxes (there were Federal and MA state taxes owed), the executor did not do that because it was their daughter. Instead, the condo was sold to pay all the owed taxes, final expenses (which the deceased aunt had intended to be paid by that insurance policy, but it went to the executor who was not an heir and not obligated in any way to use that money for the estate), and the fees charged by the executor. The end result was that FIL was left homeless (he was supposed to be able to live in that condo) and inherited just enough money to boot him off his Section 8 housing. The other house eventually went to pay back Medicaid when the aunt in the nursing home finally died a few years later.

The grand-niece quickly went through all that money with not much left to show for it. Oh yeah, there were about 10 other grand-nieces and grand-nephews including that grand-niece's brother who got nothing.

So I'm not a big fan of doing all sorts of gyrations to avoid probate and have everything pass directly to the heirs because my experience has been that it has quite a lot of unintended, and mostly bad, consequences.

DH and I have promised the kids that they won't have those issues, and have had pretty much everything in a trust since they were 3. We also have the estate plan set up to preserve each of our lifetime exemptions to help minimize the estate taxes the kids may need to pay. But we also did all of this with an estate planning attorney, and have updated the trusts over the years as tax laws and our needs have changed.
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2gifts asks,

<<Anything in your will goes through probate, but the idea is to transfer as much as possible outside of the will.>>

I'm not sure why everyone is so terrified of probate, though I realize this may not be your opinion and you are just responding to others in the thread.

</snip>


It depends where you live. I grew up in Connecticut which is recognized nationally as having the most corrupt Probate Court System in the country. From what I understand from living in California for a few years, it's almost as bad there, at least in terms of the fees they skim off a probated estate.

Anyways, I wrote up my experience with the Connecticut Probate about 10 years ago on the REHP site. I was so Po'ed at what the Court Appointed Executor was doing, that I fronted $20,000 in legal fees out of my own pocket to go after him. My attorney marveled, "This is an interesting case, nobody does this kind of thing out of principle."

My experience with Judge Walter A. "Sleepy" Clebowicz and the New Britain, CT Probate Court
https://www.retireearlyhomepage.com/probate.html

</snip>


As far as getting Estate Taxes paid without going through probate, Fidelity or Vanguard won't release a brokerage or mutual fund account until they have evidence that all tax liabilities have been paid. So if there are multiple heirs, they will have to cooperate to see that the tax returns completed and payment funded. Or if there's a disagreement, it will have to go to probate and cost them even more --- their choice.

intercst
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DH and I have promised the kids that they won't have those issues, and have had pretty much everything in a trust since they were 3.

Isn't a trust just another way of avoiding probate?

PSU
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Isn't a trust just another way of avoiding probate?

Yes. And it's usually a whole lot cleaner that trying to use a series of TOD accounts and named beneficiaries to avoid probate.

A trust for all (or the bulk) of your assets can make administering your estate very easy. It puts your successor Trustee in charge. You can instruct them to pay all of your final expenses and any outstanding bills. You can instruct them to pay any estate taxes. A trust can avoid probate, but it doesn't bypass estate taxes, although it can take advantage of tax laws to minimize estate taxes.

Most importantly, you can leave a simple portion of your estate to various people without having to specify the exact assets. With TOD accounts, the named beneficiary gets that account whether its 5% of the estate or 95%. You can fix this by leaving each beneficiary the same fraction of each individual account. But then what if you decide to change that fraction down the road? Maybe you decide to make a large gift during your lifetime to one beneficiary, then reduce their fraction of the remaining estate? Then you'd have to go to each account and change their portion. And you'd have to file a new deed on any real estate.

With a trust, you can simply amend the trust - one change and it's done.

If you have a single heir and an estate small enough to avoid estate taxes, TOD accounts are fine. But many people reading this site will have multiple heirs and could even have enough money to make estate taxes an issue. For them, a trust will almost always be easier to administer - both before and after your passing - than TOD accounts and/or named beneficiaries.

Of course, IRA and 401Ks have significant income tax advantages to passing them along as named beneficiaries rather than naming your trust as a beneficiary. So you do need to keep that in mind when planning your estate.

There are horror stories about trusts, too. So they are not a cure-all. They are just a tool in the arsenal to be used when appropriate.

One of the most important things I can recommend about a trust is to actually read the entire trust before finalizing it. You need to understand everything there. If you don't understand something, that's a sign that something may be poorly written. Don't just sign a "fill in the blank" trust off the internet, nor one you're paying good money to a lawyer to write. Here's an inside tidbit on lawyers - they usually use a fill-in-the-blank trust. Or at least start there before doing a bit of tweaking. Especially if they only do trusts as a part of their practice, they may not have actually read the trust, either. So protect yourself and read the trust.

--Peter
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I will say that if everything passes outside of probate, then there's nothing left in the estate to pay for things like estate taxes, final expenses, or remaining debts, and that can cause all sorts of headaches.
-----------------------------------------------------------------------------------------------------

Not in my state.
The estate must go through an inventory and reconciliation before any assets can be distributed. TOD, POD and direct beneficiary are all held up until the process is complete. All liabilities must be identified and satisfied. This process takes at least 4 months. I have seen it take over 2 years when the deceased had a home that appeared to be "underwater" on the mortgage. Only then do the remaining assets go to probate.
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You've hit on most of the points about trusts, but there's one more that was a huge factor in us doing trusts from back when our kids were 3 years old. Trusts and their terms are private and so it's very difficult to contest one unlike wills which have to be probated. We had a huge and very much justified concern that if we both died, one of DH's sisters would do everything she could to get custody of our children just to get to their assets. A trust helped us to solve that issue as best we could. We even went so far as to have a notarized document on why we chose a friend to be their guardian and my brother to handle all the finances instead of any of DH's siblings, so we covered all the bases as best we could.

The kids are now 30, so we don't have to worry about that as much, but over the years, we have seen repeated behavior by that one sister that proved to use that our fears were very much on point.
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The estate must go through an inventory and reconciliation before any assets can be distributed. TOD, POD and direct beneficiary are all held up until the process is complete. All liabilities must be identified and satisfied. This process takes at least 4 months. I have seen it take over 2 years when the deceased had a home that appeared to be "underwater" on the mortgage. Only then do the remaining assets go to probate.

That was not required in MA at the time that the estate I described was settled. The TOD account was distributed prior to estate settlement, and the executor used the sale proceeds from the condo to pay all expenses, so perhaps was able to prove that the condo value was sufficient to get that account released. I don't know how that worked. I just know that it happened, and I do know the timing. I also know that it didn't have to be that way, but the executor chose to allow their own father to become homeless where that could have been avoided, but the conflict of interest was that the executor's own daughter was the one inheriting all that money, and knowing the executor, I'm pretty sure they also got a piece of that from the daughter.

Since we live in MA, we vowed not to leave our kids with any sort of mess. We also want both kids to inherit equally, and have things set up to do that. DD is in much better financial shape than DS by virtue of career choice, but they will both get the same amount when we pass on.
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Yes. And it's usually a whole lot cleaner that trying to use a series of TOD accounts and named beneficiaries to avoid probate.

I'm not arguing that it isn't cleaner. I'm just making the observation that she said "why is everyone so terrified of probate" and then say I have a trust.

PSU
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It depends where you live.

This point cannot be over overemphasized. I have dealt with 2 estates in my state* and it was pretty easy and not expensive....

which is why I don't feel the need for a trust. However, I see the reasons that others have them and discuss this pretty much at least once a year with another poster here.

*This is also a reason I somewhat resist owning property in states other than my own.
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Probate can be clean and easy, or it can be really messy and delayed. Depends on a lot of factors.

We set up a trust to avoid that, among other things. No one can touch the money that we haven't approved to touch the money. We only have 1poorkid, so everything goes to her. Not that we have family issues, as others seem to have. Her only aunt would be concerned for 1poorkid's wellbeing over her own, so not a problem. Everything beyond that are cousins, and most of them are good (and would have no claim regardless).

So 1poorkid can take over immediately and start paying bills generated by the estate (taxes, utilities, whatever). She is as responsible as one would expect of a 20-something, so no concern there. Avoiding probate just makes it easier for her. We set it up when she was a teen (yeah, we were late to the party), and specified people we trusted to administer it for her needs.

But as I understand it, if you miscreant relatives and friends, a trust assures they can't get their grubby paws on it. As mentioned in this thread, wills can be contested and draw out probate. Trusts pretty much can't.
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The grand-niece quickly went through all that money with not much left to show for it. Oh yeah, there were about 10 other grand-nieces and grand-nephews including that grand-niece's brother who got nothing.

So I'm not a big fan of doing all sorts of gyrations to avoid probate and have everything pass directly to the heirs because my experience has been that it has quite a lot of unintended, and mostly bad, consequences.


Most of the complaints you listed over the use of TOD are in no way avoided by doing the exact same thing (leaving it all to a grand-niece) by using a Will instead (absent the ability to contest the Will).

Poor planning will muck up any plan.
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Then you'd have to go to each account and change their portion. And you'd have to file a new deed on any real estate.

With a trust, you can simply amend the trust - one change and it's done.


In my experience, it is not quite that simple. You will still want to update each account with the amended trust document - otherwise, the financial company may pay out under your old instructions.
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You will still want to update each account with the amended trust document - otherwise, the financial company may pay out under your old instructions.

I have no idea what you're talking about here.

When you have a trust, you don't give the financial company any instructions regarding how to pay out the account. All they know is that the account belongs to a trust. It's not really different that the account belonging to an individual or a partnership or a corporation. In none of those situations does the financial institution have any need to determine who to pay the account to.

In the case of a trust, it is the trust document that determines what can be done with the financial assets in the account. When you die, a new trustee steps in. All the financial institution needs is confirmation that the prior trustee is no longer the trustee - maybe a copy of the death certificate or the resignation of the prior trustee - and the relevant portion of the trust designating the successor trustee. That is commonly done by providing a "Certification of Trust" which spells out only the portions of the trust relevant to the bank or brokerage. That would include things like the formal name of the trust and how to determine the successor trustee when the current trustee is no longer in that position. They need nothing at all regarding the ultimate disposition of the assets.

Most of the time you never give a financial institution the complete trust. That's kind of the point of a trust. To keep your private business private. They only get the portions they need to know. And they never (or perhaps almost never) need to know who the ultimate beneficiaries of the trust are.

So if you amend your trust to change the beneficiaries, you don't need to give any info to the financial institutions holding the trust's assets. But if you change the successor trustees, then you would need to tell them about that.

--Peter
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Most of the complaints you listed over the use of TOD are in no way avoided by doing the exact same thing (leaving it all to a grand-niece) by using a Will instead (absent the ability to contest the Will).


Maybe. But if the money had been left to the grand-niece via the will, then it would have first been available to the estate to pay the expenses with grand-niece getting the remainder. At least that would have been a possibility which did not exist because of the TOD. Instead, the only other property, which was the condo, had to be sold to pay for the expenses. And the other heirs would have had a way to fight to have the cash used instead of selling the asset, but they didn't have that available to them because of the TOD as the account was therefore outside of the terms of the will.

Poor planning will muck up any plan.

I suspect this was more a case of DIY planning having unintended consequences vs. poor planning.
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When we updated my mom's trust, all the banking/financial folks wanted new copies. They will likely act on the instructions of the copies they have, so it would behoove you to update them.

Also the medical people wanted the PoA and Living Will bits.

1poorguy
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When you have a trust, you don't give the financial company any instructions regarding how to pay out the account.

We often request the entire trust document not just the certificate. I assume this is due to a desire reduce the potential for fraud as it pertains to the trust details. We also require the accounts to be updated when the trust is amended (otherwise, how would a financial institution know of any changes in powers, like a change in successor trustees).

A quick link of others stating the same.
https://pharoslaw.com/2018/03/03/certification-trust-banks/

When a customer tells their bank that they have a trust and that they want to “connect” their bank accounts with the trust, it is customary for the bank employee to tell the customer that in order to honor such a request, the customer must provide the bank with copies of the entire trust agreement...

-------------

Yes, I know you are not necessarily required to but each financial institution may have their own rules in excess of the min requirements.
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We often request the entire trust document not just the certificate.

Here in California, we have a law that requires financial institutions to accept a Certificate of Trust in lieu of the entire trust. Is that not true in other states? Seems to be a pretty common sense thing.

And I still maintain that it is no business of a financial institution as to who is the ultimate beneficiary of the trust. The institution has no need to deal with the beneficiaries. Their dealings are entirely with the Trustee.

A quick link of others stating the same.

That article is all about pushing back when banks ask for the whole trust instead of accepting a Certificate. And apparently Utah has laws similar to CA, in that banks and other financial institutions are required to accept the Certificate.

If I may quote the tail end of the article:
...eventually, we always end up at the very same ending place–someone at the bank acknowledges the existence of Utah Code 75-7-1013 and also acknowledges that the bank does not REALLY need all of the trust papers. I may send a few other select pages to the bank on rare occasions, but never, never, never do we provide the bank with the entire trust agreement. Never.

That Utah code section sounds pretty similar to CA Probate Code 18100.5 https://leginfo.legislature.ca.gov/faces/codes_displayText.x...

I encourage folks to learn the law regarding this in their own state. An internet search on "Certificate of Trust" and including their state name should be reasonably productive.

(On a quick test, it looks like NY, MA, IL, and FL have laws similar to CA and UT. I'd hazard a guess that my random checking did not uncover the only states with these laws.)

We often request the entire trust document not just the certificate.

Yes. I know I'm quoting the same sentence again. After reading the article you linked to a second time, it sounds to me like you are in the position of that "dutiful employee" - doing exactly what your employer tells you to do. And that's great. But it does not necessarily make the request appropriate under state law.

--Peter
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This discussion of POD and TOD accounts, trusts, and wills has been interesting; however, who is responsible for filing Form 1041 for the portion of the tax year prior to your death?

You are likely to have pensions, taxable Social Security benefits, RMD, interest and dividends, capital gains (and losses) that occurred before your death that need to be reported and income taxes paid. If all of your accounts are either POD or TOD accounts, aren't the accounts effectively emptied on the day of your death?

Perhaps I need to overcome my aversion to the legal profession and create a will and/or trust to deal with the final year of my life.
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however, who is responsible for filing Form 1041 for the portion of the tax year prior to your death?

</snip>


It could be the executor or one of the heirs. I don't think the IRS cares who completes the form, just that it's done and taxes paid.

intercst
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I would imagine that these days virtually every financial institution would require the complete trust as part of KYC diligence and related regulations.

It would be more than a little awkward for the finanical institution to subsequently learn that the grantor and/or beneficiaries are connected to ill-gotten gain and might, as a result, the financial institution may have liability for money laundering or other aiding and abetting charges - gambling, illegal drugs, trafficking, etc.

BWDIK?

Regards, JAFO
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This discussion of POD and TOD accounts, trusts, and wills has been interesting; however, who is responsible for filing Form 1041 for the portion of the tax year prior to your death?

Assuming your trust is a grantor trust for tax purposes (which is true of most trusts formed for estate planning purposes), there is no Form 1041 before your death. All of the trust income and deductions are reported on your 1040.

So, the question you really need to know is who is responsible for filing your final 1040? That could be specified in your will. Yes, even if you have a trust, you still need a will. They're often called "pour over" wills. They generally say that anything you have is left to the Trust. That takes care of all the small stuff which is often not worth the hassle of getting in to the trust. Cars, furniture, personal effects, things like that. Plus that will takes care of anything you may have forgotten to get into the trust. Things like the Aunt who left you a 10% interest in an old family cabin, along with 9 of your cousins. Getting that into the name of the trust is a hassle, and the pour-over will can handle it.

With a will comes an executor - who could easily be the same person that is the successor trustee of your trust. And that's the answer - your executor will file your final 1040. One of the terms of the trust should be to pay your final expenses. And one of those expenses would be your final income taxes.

You are likely to have pensions, taxable Social Security benefits, RMD, interest and dividends, capital gains (and losses) that occurred before your death that need to be reported and income taxes paid. If all of your accounts are either POD or TOD accounts, aren't the accounts effectively emptied on the day of your death?

Yes, they are. And that makes paying your final income tax bill an issue. It becomes more of an issue if your heirs (those named in the POD and TOD accounts) don't get along well. A trust is a cleaner way to handle your final taxes.

Perhaps I need to overcome my aversion to the legal profession and create a will and/or trust to deal with the final year of my life.

I would highly recommend that. Good lawyers provide good and necessary services. They may not be cheap now, but they are often cheaper than not using one.

--Peter
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It would be more than a little awkward for the finanical institution to subsequently learn that the grantor and/or beneficiaries are connected to ill-gotten gain and might, as a result, the financial institution may have liability for money laundering or other aiding and abetting charges - gambling, illegal drugs, trafficking, etc.

BWDIK?


Perhaps Texas Property Code - PROP § 114.086. Certification of Trust could help with the BWDIK part. Specifically, paragraph (f) https://codes.findlaw.com/tx/property-code/prop-sect-114-086...

(f) A person who acts in reliance on a certification of trust without knowledge that the representations contained in the certification are incorrect is not liable to any person for the action and may assume without inquiry the existence of the facts contained in the certification.

None of this would prevent a financial institution from investigating the trustee and/or the trust. Since the certificate must include the name of the settlor (aka grantor), they could investigate that person as well.

And, as you mention, there are still KYC issues. The institution could certainly ask for additional information about the trust, and refuse to do business with the trust if that information wasn't provided. On the other hand, there are likely multiple ways of satisfying KYC. And there's the core question, who IS the client? Is it the trust? The trustee? The beneficiaries? Who do you need to know?

--Peter

PS - Do the lawyers writing law have an aversion to commas and periods and other punctuation? Must every sentence in the law be compound and complex? And contain more than 40 words?
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With a will comes an executor - who could easily be the same person that is the successor trustee of your trust. And that's the answer - your executor will file your final 1040. One of the terms of the trust should be to pay your final expenses. And one of those expenses would be your final income taxes.

My wife died in January 2019. For the 2019 tax year, I was required to file Form 1040 and Form 540 as our final MFJ tax returns. In addition, I had to file Form 1041 and Form 541 for my wife's estate. Were the these forms required because her inheritance from her mother's death wasn't received until after her death?

I did make a mistake in stating Form 1041 covered the period prior to death.
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Were the these forms required because her inheritance from her mother's death wasn't received until after her death?

To be honest, I can't tell from what you posted. And at this point it's all water under the bridge.

Typically, you'd file those income tax returns (Form 1041 and 541) because there was enough income to require filing. Maybe her mother's estate included some interest that made your wife's estate need to file.

--Peter
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ptheland:

<<<It would be more than a little awkward for the financial institution to subsequently learn that the grantor and/or beneficiaries are connected to ill-gotten gain and might, as a result, the financial institution may have liability for money laundering or other aiding and abetting charges - gambling, illegal drugs, trafficking, etc.

BWDIK?>>>

"Perhaps Texas Property Code - PROP § 114.086. Certification of Trust could help with the BWDIK part. Specifically, paragraph (f) https://codes.findlaw.com/tx/property-code/prop-sect-114-086......

(f) A person who acts in reliance on a certification of trust without knowledge that the representations contained in the certification are incorrect is not liable to any person for the action and may assume without inquiry the existence of the facts contained in the certification."


Maybe. Texas law, however, will not preempt federal law and regulations and such a certificate may not satisfy the federal requirements.

"None of this would prevent a financial institution from investigating the trustee and/or the trust. Since the certificate must include the name of the settlor (aka grantor), they could investigate that person as well."

Agreed.

"And, as you mention, there are still KYC issues. The institution could certainly ask for additional information about the trust, and refuse to do business with the trust if that information wasn't provided. On the other hand, there are likely multiple ways of satisfying KYC."

I am not familiar with the details of KYC.

"PS - Do the lawyers writing law have an aversion to commas and periods and other punctuation? Must every sentence in the law be compound and complex? And contain more than 40 words?"

I do not write laws, but I know that it can be very difficult, especially with complex concepts or with multiple exceptions.

See e.g., https://www.nytimes.com/2018/02/09/us/oxford-comma-maine.htm... regarding an Oxford comma and see https://www.bbc.com/worklife/article/20180723-the-commas-tha... for another discussion of the same case and other cases

Regards, JAFO
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