You've received an e-mail from a foreign lawyer telling you that a long-lost relative has died and that you are the only heir. You are entitled to millions from the deceased's estate. Can this be possible?
While it is possible that your initial contact regarding an estate inheritance could come through your e-mail inbox, it is extremely unlikely! I have even received these e-mails with a subject line "Beneficiary Notice" stating that I am a beneficiary of an estate and, as such, am entitled to a hefty sum of money from an overseas bank. The e-mail goes on to request additional contact information from me, so that they can file the necessary Probate documents and release the money to me. When they throw the word "probate" in there, it all sounds pretty legitimate! But, this is just another one of those e-mail scams that could lead to lots of headaches if you follow through and provide the requested information.
E-mails, like the one I just described, are nothing more than scams from people who are just after your money or your personal information. Once you send them a response, they will usually ask for even more personal information. They will use a lot of tricks to try to make the process seem legitimate. However, once they have your personal information, they will go after your money. One technique they use is claiming you will need to pay them a free before they can release the "inheritance" to you (and they say they can't deduct that fee from the money you are about to receive, due to legal restrictions). You can be pretty certain that after you send them the money they've asked for, you will never hear from them again.
Here's my advice: DELETE any email like this immediately! Do NOT click on any links contained in the e-mail. Do NOT provide personal information. If you are victim of such a scam, you can contact the Attorney General's office in your state. You can also file a complaint with the Federal Trade Commission and the Internet Crime Complaint Center.
Just as your mother no doubt told you, if something seems too good to be true, it probably isn't!
The IRS issued temporary and proposed regulations providing guidance on the requirements for electing portability of a deceased spouse's unused exclusion (DSUE) and the surviving spouse's use of the DSUE amount.
One of the points clarified deals with those estates that are below the filing threshold and for the sole purpose of making the portability election. Under the temporary regulations, an executor does not have to report the value of certain property that qualifies for the marital or charitable deducation. The executor would have to provide the best estimate of the total gross estate and sign the return under penalties of perjury.
Also, another of the important points made is that if no estate tax return is required to be filed, failing to file a timely return will be considered an affirmative statement signifying the decsion not to make a portability election.
Answer: The reporting of Trustee fees by a trust on a Form 1099-Misc is not required. The 1099-Misc is for payment of services performed in a trade or business by people not treated as employees.
Trusts and estates are generally not treated as a “trade or business” and non-professional trustees are serving in a capacity that does not rise to the level of a “trade or business” activity for that individual. Therefore, we generally do not issue 1099s for executor or trustee fees.
By: Deanna DeWitt
As a trusted advisor, one’s CPA is often one of the first people notified when a client dies. As a CPA, it is critical to know and understand both the legal and moral steps involved in helping a family cope with a death. It is important to note that family members and friends are likely to be distraught immediately following the death of a loved one, even those who typically understand business and financial matters. Therefore, it is the CPA's job to step in and provide the executor, family members, and friends with comfort, support, and financial advice.
Many times, when a client dies, the CPA will need to begin working with new people to help them settle all of the issues at hand. Often, a family member is the one appointed to conduct all of the financial affairs. Regardless of who will be involved in settling a decedent’s estate, it is important to start building relationships with those people as soon as possible.
One way to do this is to attend the wake or other observance, as the family’s customs and practices dictate, as well as to send a condolence letter to the family. This lets them know that you are thinking of them during this difficult time and will help you to gain their respect and trust. The second step that should be immediately taken is to let the appropriate members of your office know that the individual has passed away. This will ensure that firm mailings or solicitations to the deceased will stop.
The next step that should be taken is to assess the executor's knowledge of their responsibilities and duties. The CPA should inform the executor of all that will be expected of them. Although being appointed as executor can be an honor, it is a difficult task for a variety of reasons.
A couple of those difficulties include dealing with beneficiaries who second guess every decision made along with being subject to personal liability for errors in administering the estate that may be made.
Following is a list of some of the most important duties a CPA should make an executor aware of:
- The executor must locate the will and take it to the local probate court to file a petition to probate. Once this is done, the executor will be granted the right to collect and distribute assets.
- The executor should take an inventory of all of the assets and secure them. For example, if the decedent had multiple brokerage accounts, the executor may want to transfer them into a single account. The executor should also keep track of any personal property still in the estate.
- The next step is to pay off the debts of the deceased. Some or all of the decedent’s assets may need to be liquidated if there aren't sufficient funds to satisfy all the outstanding debts.
- After all debts have been paid by the estate, the executor can then determine which assets are to be liquidated and distributed to the heirs in the form of cash and which assets are to be distributed directly to them.
- It is also the responsibility of the executor to make sure that all required tax returns are filed and that any tax payments associated with those returns are remitted in a timely manner.
- Throughout the implementation of all of the above steps, the executor has a fiduciary duty to keep all of the beneficiaries reasonably informed. Many states have laws on the books that require this.
- Finally, the executor must distribute the remaining estate assets according to the decedent’s Last Will, or state law if there is no will.
The ultimate goal of the CPA should be to compassionately guide the executor through the above process as easily as possible. Encourage the executor to seek your professional guidance and the advice of legal counsel immediately after the passing of the decedent, as well as at any time they have questions or concerns. This will ensure that all steps are executed properly and will help the client avoid unwanted and unnecessary complications in the future.
By Barb Theofilos, CPA
We have all been to the doctor for a check-up. Preventive measures can ward off unintended consequences or detect deficiencies early on. We go because we know it's the best thing for us and it will ultimately benefit us in the future.
So, when was the last time you had a beneficiary check-up? Just as your doctor wants you to get a regular medical check-up, your accountant wants you to have a beneficiary check-up. When you update your Will, which governs the administration of your estate, this does not automatically update your beneficiary designations. There are certain assets that pass on to your beneficiaries as a matter of law and are governed by beneficiary designations and are generally not governed by the provisions of your will. This detail is often overlooked by clients because it's the last thing on their mind. With so many things competing for our time and attention, it's easy to lose track of financial details such as this one.
There are key events that take place in our lives that require updates to beneficiary designations. A few of these include a death in the family, a birth, divorce, marriage, or even remarriage. Updating our financial records is sometimes the last thing on our mind in these instances but it is still extremely important. Missing an opportunity to update these records can have unintended consequences.
Take William for instance... his situation involved a $400,000 employer-sponsored retirement account. He named his wife, Sarah, as his beneficiary back in 1975, shortly after they were married. The couple divorced 20 years later in 1995. Sarah waived her rights to the benefits of William's employer sponsored retirement plan as a part of the divorce decree; however, William never got around to updating the beneficiary designation with his employer. He died in 2000 without making these changes. So, what happens now?
The employer-sponsored retirement plan documents stated that beneficiaries had to be formally updated on a beneficiary form and an outside beneficiary change was not sufficient. This means that Sarah’s waiving of her rights to the retirement plan funds pursuant to the divorce decree had no effect and she still received the funds, even though this was not William's intention.
If William had updated the beneficiary designation before he died, his retirement account would have been paid to the person of his choice, rather than his ex-wife, Sarah. The beneficiary designation could not be changed once William passed away.
When updating one’s beneficiary designations it is important to use the plan's official beneficiary form to ensure that the change is being made in the manner that you intended. This important point is evidenced in William's story above. Keep copies of your beneficiary designation forms and verification's received from your account providers.
Also keep in mind that you can designate contingent beneficiaries as well. This is especially important, should your primary beneficiary die before you or at the same time as you.
Examples of plans with beneficiary designations that would need to be updated include, but are not limited to the following:
- Employer sponsored benefit plans
- ESOP or other stock purchase plan
- Retirement accounts such as IRAs, SEPs
The example above demonstrates the importance of keeping beneficiary designations up to date, especially after life altering events such as death, birth, divorce or remarriage. It's easy to overlook this financial detail, but its oversight can have outcomes that were never intended.
Ohio S.B. 117 signed by Governor Kasich will take effect in March 2012. One of the more interesting changes made by this bill is in regards to trustee duties with respect to life insurance as a trust asset.
Notwithstanding the provisions of the Ohio Uniform Prudent Investor Act, it does not hold the trustee, attorney or any person consulted with regard to the creation of the trust liable for any loss arising from the absence of certain specified duties regarding acquiring, retaining or owning a life insurance policy as a trust asset.
It applies to trusts established before, on or after the effective date and to life insurance policies acquired before, on or after the effective date.
The annual exclusion gift amount will be $13,000 (there is no inflation adjustment for the 2012 amount).
IRS Posts Publication 4895, Tax Treatment of Property Acquired from a Decedent Dying in 2010
IRS posted on October 19, 2011, Publication 4895. If you have an estate filing Form 8939 (Basis allocation form) or a 2010 estate that is filing a Form 706 (and extended un March 17, 2012), then this is a must read!
Final Form 706 for 2011 decedents released
The one major change on this Form 706 is the change in the applicable exclusion amount to incorporate a predeceased spouses unused exemption amount (for predeceased spouse’s dying after December 31, 2010).
With just days left before the Sept 19, 2011 filing deadline for 2010 Federal Estate returns, the IRS posted the final Form 706 and Instructions on their website on 9/8/2011.
Taxpayers may apply for an automatic 6-month extension via Form 4768. This is also an extension to pay tax due! There will be no late-filing or late-payment penalties.
However, interest will be charged on any estate tax paid after the original due date.
2010 Individuals, estate or trusts, who inherited property and sold it during 2010 have to file their returns by October 15, 2011.
However, the basis allocation form is not due until January 17, 2012.
Therefore, a taxpayer may not know the actual basis of the inherited property by the time they file their income tax return.
The IRS is providing penalty relief to many individuals, estates or trust that have already filed their 2010 income tax returns.
The previously issued proposed regulations issued in July 2007 regarding trust investment advice costs have been withdrawn and new proposed regulations have been issued.
We’ve seen much debate over this issue in the last couple of years.
In summary, to the extent that a portion of the investment advisory fee exceeds the fee generally charged to an individual investor and that excess is attributable to an “unusual investment objective”, the excess is not subject to the 2% floor.
The newly proposed regulations go on to provide guidance on whether a cost would “commonly or customarily” be incurred in the trust’s administration.
(These are only proposed regulations, Final regulations could be different.)