I am appointed executor for my mother's will. She may have a few thousand left if she lives that long, but all her accounts have all siblings listed as equal beneficiaries. So if there are outstanding bills, expenses, or debts, how do I take care of my legal obligation to pay those off if the financial institutions pay on death directly to the beneficiaries?
Setting up an estate account is simple. First you have to apply for an EIN for the estate. You can do this online. It is like getting a SSN. Then go to the bank with your letters testamentary and the death certificate and set up the account. Transfer the money into the account.
There is one thing to consider -- If any accounts have another name on it, and if so are the accounts payable on death (POD). If someone else has a name on an account, they can write checks or draw money from it without going through probate, BUT there can be tax implications. Ask the attorney who is handling your probate what would be the best way to handle these types of accounts to avoid tax problems. (I don't know the answer myself.)
Theresa2: I have a pet peeve in this area of beneficiaries. They should be paid first. Most lawyers will not agree with me, but my lawyer does! POD in the Beneficiary Statements is helpful along with each beneficiary's name, S. S. number, and full address. No need for a birthdate, unless requested.
Here we go again: Trot on down to the Courthouse with the deceased last bills. The clerk will prepare a Notice to Debtors and Creditors. If a creditor does not respond within 90-120 days, then do not pay the bill!
My goal is to have my estate insolvent on the day of my death..
What happened in your case is actually the result of proper planning. By designating beneficiaries of each account, they avoid probate.
However, if you act as executor, you will have a personal responsibility to administer the estate properly. That is to say, if it is not done correctly, then you must pay from your personal funds. Therefore it might be a good idea to either get insurance, or retain an attorney who is licensed and insured.
Legal fees and expenses of administration are first priority claim, so it is paid before all others. In Pennsylvania, my state, the priority of claims is set forth in Section 3392 of Title 20 of our laws. Section 3162 of the Code provides that the executor must advertise the grant of letters and notify creditors to bring claims within one year. Also, although the accounts with beneficiaries passed outside probate, there may be Inheritance taxes due on them. It depends upon the state laws where you live. There may also be Medicaid claims due against the estate. As you can see, it can get complicated, but only for someone who has not done it many times before. I hope this information helps.
The question I would put to you is: are you currently the DPOA? If you are, you have the authority to move your moms money around, close old accounts, open new accounts, etc.
So, are you concerned about paying her bills after death, or NOT paying her bills after death?
If you are currently her DPOA and DON'T WANT to pay her creditors, leave the accounts as they are. Some folks, with legal or banking advice, have intentionally set up accounts this way to avoid probate and creditors.
If you WANT to pay her expenses at the end, you can open accounts that are not POD so that you DO have funds available to pay her debts and final expenses. These accounts can be opened with a joint owner , such as yourself, thus avoiding probate, but knowing that YOU as the executor or would distribute any remaining funds to the beneficiaries according to the terms of the will.
1. If you do hold a valid power of attorney, and you transfer funds which will adversely affect others, you may want to consult with the beneficiaries under any will. They are the ones who have the right to complain about actions taken under the power of attorney. In my state, Pennsylvania, the beneficiaries can file a citation against the agent under a P.O.A. for an accounting. Also, we have a provision in our state laws, in 20 Pa. C.S.A. § 5601, which prohibits co-mingling of funds, so do not mix the principal's funds with yours even though it is a joint account.
However, the laws of your state may permit compensation to you for serving as agent under a Power of Attorney. My state, Pennsylvania, does provide that under section 5609 of our Code. Also, you may have the power, as agent, to prepay funeral expenses. I do not know what state you are in, and so I cannot tell you for certain.
2. The essence of my first message was that, if you step in to serve as an executor / executrix, then do the job right to avoid personal liability. In reality probably 95% of all work done by executors is done without a problem. However, when there is a problem, who do you think is called upon? A lawyer of course, and lawyers may have enough business on this topic to keep them busy for years.
3. You do not have to serve as executor if you do not wish to. So long as you bring the will to the appropriate authorities so that someone may be appointed, you can renounce your right to serve as executor. By way of illustration, I drafted a will years ago for a very fine individual who passed away recently. There were Medicaid liens that consumed the entire estate. The Dept. that collects those liens will allow the executor the higher of 6% of the estate (by virtue of Title 55, Section 258 of our Pennsylvania Code). The executor did not want to get involved, and filled out a renunciation and asked me to deliver that, plus the final will, to our local Register of Wills. I am doing so. A creditor (probably the Dept of Welfare) will then probate the estate to collect the money due them.
4. If there is not sufficient money to pay creditors, you, or the designated beneficiaries of the accounts, are not responsible for outstanding bills. There are some collection agencies who may try to collect from those who do not have a legal obligation to pay and there have been newspaper articles and court cases regarding those companies.
Now my mother currently has no bills, house is paid in full, she has one credit card with about $100 owing on it. I am planning on pre paying her funeral expenses, her burial plot was purchased in the 1960's so that is paid for. The only thing I am concerned about is the future and the possible need for a nursing home down the road. At that point Medi Cal would most likely come into play. What bothers me is I am an upaid caregiver 24/7 and I pay her rent and buy groceries, so I keep increasing her wealth which will then have to be spent down. I am wondering if I should stop paying her, I have already paid her about $57,000, which just goes to pay all her bills while keeping her savings untouched.
Does anyone have any suggestions?
As for the deceased's "bills", you file a Notice to Debtors and Creditors in your county. If no creditor answers within 90-120 days, then, do not, I repeat, do not pay the decedent's "bills". If a creditor answers with the final tally, then that bill must be paid by the Executor ( Personal Representative).
No one has to worry about the Inheritance Tax, " Death Tax" or Estate Tax right now as the amount retained by the estate must exceed $5,000,000. It changes every year.
Anyone know what the exemption will be in 2014?
There are differences: For example in my state, Pennsylvania, you do not file a Notice to Debtors and Creditors and wait 120 days. Rather, you publish a notice in the local paper and the creditors must respond within one year (with some minor exceptions). In my state, Pennsylvania, there is an Inheritance Tax due on every estate, no matter what the value. As you point out in your answer, there is also a Federal Estate Tax for large estates over $5.M, but "Inheritance Taxes" are different from the Federal Estate Tax. Every state has their own law about Inheritance Taxes.
Many of us who practice Estate Planning and Elder Law know Ed S. (nice guy) and about trust to trust transfers of IRA accounts (which were used before Ed came along and marketed them). We frequently set up trusts for protection of beneficiaries to protect against Medicaid claims and more. However, the law directs that you do it at least five years in advance. If you do, it is perfectly legal.
If you have a state specific question about law, I suggest avvo.com where you will get a free answer from a local lawyer, about your state's laws. I think this forum is great for ideas for caregivers, but not the place to post legal questions, because there are 50 different sets of laws, and an answer may be incorrect and harm someone. I also answer questions on Avvo. I will continue to use this site for helpful information about caregiving, but it's not the place for legal questions if there is a much better alternative, more likely to provide the correct answer.
My mother made me joint owner with right of survivorship of all her personal accounts. Upon her death, the accounts became mine and I paid her final bills from those accounts. Thus, there was no need to set up an account called the estate of ____ from which the person's final bills are paid.
But one thing that is a real issue for elders is that for those who are on Medicaid (and really so much on this forum is from those who have parents either on Medicaid or trying to get them on Medicaid) is that there is no real $. They may have a small checking account with less than 2K in it (as an Medicaid allowed asset) & from which their DPOA pays their monthly income to the NH their required by Medicaid co-pay, so there is just no real $ anymore. For just so many on NH Medicaid, they do not have any funds left, have spent-down everything and their monthly income (SS and any retirement) goes directly to the NH for their co-pay & personal needs allowance. They have to be at need for Medicaid which means impoverished… there is no $$ anymore.
If they are on Medicaid & don't have a prepaid funeral & burial, then family ends up paying and not getting reimbursed as there is no estate, no money. If they are on NH Medicaid and still have a home, then someone within the family has been paying on everything for the home for the period of time that the parent has been on Medicaid and they can have their own claim against the estate to recover those costs. But family have to just front all those costs from the time Medicaid starts till the house is sold and then deal with whatever claim or lien Medicaid's MERP may have on the property. For those whose parents or elder is receiving Medicaid, there are very limited options and the main one is that you just pay for everything
(from funeral to taxes on the house) and may or may not be reimbursed from the estate by the sale or transfer of the home through traditional probate, small estates affidavit or doing a muniment.It's just never simple.
I am currently probating an estate for a family where the funeral expenses are being paid first, and the beneficiaries do not receive anything because there is not enough money available. The laws in your state may differ. Again, you want to be careful about the way you handle the estate because the executor / executrix may be personally liable from their own funds for any mistake. In my state attorneys are required by law to have malpractice insurance, so that insurance inures to the benefit of the executor who retained the attorney. However, in many cases the attorney has done it so many times before that no mistakes are made. The attorney fees are paid from the estate because the courts want the estate handled properly. When there is a mistake, there may be clouds on the title of real estate or later litigation, which nobody wants.
If you insist on doing it yourself, you should find somebody who has done it before in your state, and get advice from them.
I've been executrix twice in TX for "aunts" (20+ years past); and in the interim lots & lots of changes especially in how the "Knowledge of distributees" is done & makes a big butt difference in what type of probate & the sequencing is done. For TX, it's 120 days with a formal TPC 294(d) form. The only latitude is just when you open probate and present letters to start the clock ticking on the 4 yrs allowed. No way I could now do some of the things I did for one of the estates as really now you have to have an attorney do things that I was able to get done in various county CH.
For those who's deceased actually died with funds & assets, you let your probate guy take the lead & hopefully they work with you to get things done so that you save some paralegal costs and do some things yourself. I did a lot of what a paralegal would do; if I'm remembering right, you were able to do that too N1.
If there were assets to begin with, the deceased probably met with an estate attorney years ago and the widow/widower has a will and game plan set up (or their kids or their estate attorney do if their surviving parent isn't able to). For those with $, the system is clearer. But I think for families who have their elder on Medicaid as the deceased was totally impoverished, dealing with after death issues (burial, probate, etc) is almost a crisis issue as family will need to front all costs & they probably don't have an extra 10-15K to start with. The deceased was insolvent, like Crowe mentioned. That coupled with the tendency for people to be cheap to begin with; plus family greed (as we read over & over on this site) & then those who just aren't comfortable in a CH & fear of probate, makes for a real mess to deal with. If you add MERP to all this, it has the potential for a real clusterF.
About 60-70% of NH residents are on Medicaid & impoverished, plus all of those who are elderly & get other Medicaid services (like PACE), so all of those are going to get a MERP letter as an attempt for recovery is required. Family may find that they have to spend $ & get legal involved even if their elders estate is insolvent or nonexistent. If the parent dies with a bit of funds, really you need every cent to pay for after death costs first & foremost.
But back to BRIAN - so just where is the $. Is is sitting in mom's bank account?
Do you have something in writing from her as to the disposition of mom's estate? Did she do a will and name someone as executor? Or is it that mom put $ away and told you to spend it on her burial? If there's a will and if you are named executor, then you determine how the $ is spent - the account can be frozen and once probate opened you place your costs to the court and will be reimbursed; if it all goes for burial, then that's just what happens; Executor & will trumps whatever Sissy wants.
Brian - BUT if it's just $ sitting there & no will, that is waaaaaay more problematic. If the bank account is POD to either you or Sissy, either of you can go and withdraw all the funds from the account once 1 of you have a death certificate. If either of you are a signature on the account, you can go and close it even before death or the death certificate is issued. Sadly often the child that took care of mom, finds out in a bank statement that all the $ has been taken by a sibling as they were a signature on the account! If Sissy is the "1 will reading from being able to afford a used car" type (this lil phrase nugget from an aunt I was executrix for), then this could shape up to be a royal PIA. You know your family best (& their spouses - which are often the source of post death conflicts). If mom is at death's door & Sissy is apt to take the $, then I would suggest that you call today to set up appointments as FH that also have burial (not all do both, but you want one that does as it's just way easier). You go to a couple of different FH and get an estimate on a preened done THIS WEEK. Then use mom's money to pay for whichever you choose. Pay for it by a cashier's check so that the funds are immediate for FH and $ removed from mom's bank account with a paper trail. F&B average about 10K too. What seems to happen based on posts on this site, is that 1 sibling takes on all the responsibility for their parent; the other siblings do nothing except to have their hand out; then when the assets are to be divided expect to get their full % and do. The courts will divide all equally if that is how the will is written. You have to be proactive in all this. Now you may want to pay for all and not need or expect any compensation from mom's estate; but don't expect Sissy or other family to compensate you for all you have done.
If mom has a home, I'd suggest the following as well:
- set aside $ for floral for the funeral. Usually not included in a pre-need.
- set aside $ to pay for initial probate costs($1,500 - 3K); if no will, you will have to do a lineal heirship and need legal to do this as well.
- funds for house costs (taxes, utilitites, yard work, etc) for 6 mos to a year. I'd prepay as much as possible now. Like 6 months of water bills. If house insurance can be paid forward, do that as well. Make sure taxes paid up.
- if you are not in town, I'd set up a property management agreement for 6 mos.
This can be with a Realtor group - they would be the ones to get the listing on selling the house. Some will reduce a bit on the final commission if you do this. Or with a totally trusted neighbor. If you're in town, keep a journal on all trips to the house and documentation on all receipts on the home as well.
Good luck with Sissy, Brian.
GardenArtist - perhaps you could give your thoughts on this?