Moms Estate

Jack’s work as the personal representative of his mother’s estate requires him to safeguard and insure her personal property against “foreseeable loss.”  

For example, he should keep house and car insurance in effect.  That way if the house happens to burn down before being sold or distributed, his mother’s heirs do not lose the value of the house from their inheritances.  Or if the car is stolen, the heirs will not lose that either.

His mother’s 2009 Cadillac is an asset where there is easily foreseeable loss even if nothing catastrophic like theft happens.  Most cars lose value as they grow older.  Her Cadillac is worth more in September 2012 when she died than it will be in January 2014, when the probate proceedings may finally be closed. 

So Jack should act to sell or distribute the car early in the process.  Otherwise, he has unwisely lost money for his mother’s heirs.

Serving as personal representative of an estate can be more complex than it may appear at first blush.  Therefore, you should make sure that the personal representative you choose in your will or trust will be able to handle all the details involved.  To learn about your estate planning options, call our office at (815) 436-1996 for an appointment.  © 2013 Gruber Law Office, Ltd.

Jack’s job as the executor or personal representative of his mother’s Will means he must take care of her personal property properly after her death.  That means securing it against theft or other loss.  And that may mean that he needs to learn some new skills.

For example, if his mother had pets, Jack must make sure they remain fed and cared for.  Sam, her loud pet parrot, may offer quite the challenge for Jack.  Regardless, because Sam is part of his mother’s personal property, Jack is bound to protect and preserve Sam whether he likes the bird or not.

Similarly, his mother’s farm needs to be properly handled.  Depending on how she was operating her farmland, Jack probably has some work to do.  Even if she was not personally farming it and it is winter, but she had grain or other crops in storage, Jack must be sure to sell it in customary and timely fashion so as to prevent the grain from losing value, even if he really knows almost nothing about running the farm.

Of course, Jack does not have to personally load and sell the grain or take care of her parrot himself, but he does need to make the arrangements to have everything necessary done properly. 

Your estate plan should take into account the talents and expertise of your personal representative and the demands of your property.  To learn about your estate planning options, call our office at (815) 436-1996 for an appointment.  © 2013 Gruber Law Office

Jack has made an inventory report of all his mother’s assets as executor of his mother’s Will.  But he must do more than just find her assets; he must also take possession and preserve them from loss. 

For example, Jack must make sure that his mother’s personal property in her house is not taken or lost, even if that means preventing his relatives from coming into her house and taking items that are special to them.  Her jewelry, china, furniture, Hummel collection and other valuable goods must be protected.

Otherwise, Jack could be held liable by the court for valuable items missing from his accounting or distribution reports.  He will either need to sell the items and deposit the money with other estate assets, distribute them according to specific directions in his mother’s Will, or distribute them at appraised value as part of the heirs’ inheritances.

Whatever way he chooses, he will have to be able to explain to the court how he appropriately carried out his mother’s Will. 

Planning so that your prized possessions go to the right people or are not simply sold for cash after your death can reduce family conflict when you are not there to cut through the drama.  Specific directions about furniture, collections, and special items are often useful.  For help figuring out how to have things done the way you want by leaving good directions for your loved ones who survive you, call our office at (815) 436-1996 for an appointment.  © 2013 Gruber Law Office, Ltd.

Jack took inventory of all of his mother’s assets after her death.  Then, he created an inventory report to file with the probate court listing every probate asset. 

That is just a start.  The probate procedure requires that he report almost every move he makes as executor of his mother’s will.

Jack will do this partly through an Accounting, also filed with the court.  If his mother’s estate lasts long enough, he may need to file several different accountings before closing the probate case. 

In an accounting, Jack must show all income from her assets and show in detail all amounts he spent.  Any debts and expenses, including taxes, he paid out with any of her assets and income since her death must be reported. 

Court supervised administration of a will has many formal requirements.  These more formal probate requirements can commonly be relaxed by choosing “independent administration” when the probate is opened. 

But an accounting will still be needed so the people who receive the final distributions from the estate can see why they will not simply receive an exact share of the value of every Inventory asset Jack’s mother owned as of the date of her death.  It simply will not be required to be filed in court unless someone whom receives it objects to it.

For advice about probate administration, call our office at (815) 436-1996 for an appointment. 

© 2013 Gruber Law Office, Ltd.

In honor of it being past April 15, we will finally fully leave the topic of taxes. 

The first reason that Jack, as executor, has had to gather so much information about his mother’s assets after her death, is to create and submit an “inventory” to his mother’s named beneficiaries in her Will and often also to the probate court itself.

The inventory should include a list all assets he found, their date of death values and any income that has come in on those assets since her death. 

For example, his mother’s house must have a value established by a real estate appraiser as of the date of her death.  The proper legal description, appraised value, and any mortgages against the property should also be listed. 

Since Jack’s mother also owned 300 shares of AT&T stock, he needs to show what price that stock was trading for on the date of her death.  In addition, his mother’s jewelry of significant value should be appraised by the jeweler, by written appraisal; her more valuable household goods and antiques should also be appraised in writing. 

There are sometimes ways around some of the more formal requirements of probate.  For advice about following through on a probate or about your estate planning options to reduce or eliminate probate requirements, please call our office at (815) 436-1996 for an appointment.  © 2013 Gruber Law Office, Ltd.

Jack has two reasons to total up what assets his mother owned at her death.  As executor of her estate, he must disclose to the court the value of the assets held in her name only at her death.  The IRS and Illinois Department of Revenue, as always, want to know even more, namely; everything she owned at death whether in her name only, held jointly with others, or was an insurance policy or other investment.

As we wrote about in earlier columns, it is important for estate tax purposes to determine whether or not his mother’s assets add up to less than $4 million.  If the total is less, there will be no estate taxes due to the IRS or Illinois.  

For probate purposes, Jack must account to the court for all that is held only in her name at her death.  If it is less than $100,000 and doesn’t include real estate, he might even be able to avoid probate altogether.

For both the IRS and probate purposes, it is the value of the asset at Jack’s mother’s date of death that is determinative.  The IRS does manage to complicate things a bit by allowing Jack to choose to use an alternate date to calculate the value for estate tax purposes instead, but Jack does not need it.

Illinois complicates the process by requiring a ‘theoretical’ modified federal tax return to be prepared and filed with the state when the taxable estate is more than $4 million but less than $5 million, even though that federal return would not be filed with the IRS. 

For advice about estate planning options to reduce after-death expenses, call our office at (815) 436-1996 for an appointment.  © 2013 Gruber Law Office, Ltd.

We gave Jack, the executor of his mother’s estate, a break in the past few columns, because it was so complicated (and important) to report the New Year’s changes to the federal and Illinois estate tax law.  And we have determined that he will not have any estate tax to pay. 

Unfortunately, that does not actually answer the question of whether he will have to file an estate tax return.  If his mom’s assets were very close to the Illinois exemption amount of $4 million, he might have to prepare the federal estate tax Form 706 and file that with Illinois and an Illinois estate tax Form 700, in order to prove no taxes are owed. 

This question is not a minor issue.  Why?  IRS Form 706 is now 31 pages long, not counting the required attachments (like appraisals and valuation reports), and requires information about everything Jack’s mother owned at her death, even if it was in joint tenancy with Jack or anyone else or if it was life insurance with Jack or someone else named as beneficiary. 

The Form 706 is time consuming and expensive to prepare.  Jack will want to legitimately avoid preparing it if he can.  Here, because his mother died with well less than $4 million, he happily will not be required to do that work as part of serving as executor.

For advice about leaving your estate to your family with a minimum of fuss, please call our office at (815) 436-1996 for an estate planning appointment.  © 2013 Gruber Law Office, Ltd.

We did not think we would ever have reason to compliment federal politicians in our column.  But it would be rude to fail to give credit when it is due.  

Of course, there is plenty to criticize with the fiscal cliff action taken by Congress on New Year’s Eve/Day at the beginning of this year.  But there is one aspect of tax law that is now a little different – in a good way. 

Estate taxes (sometimes called death or inheritance taxes), have been important to what we do and talk about every day with our clients.  And the New Year’s fiscal cliff law means that we will rarely have to explain it in detail to most clients anymore, and definitely not every day.

As background, if Jack’s mom had died in 1996, he would have been required to file a complicated estate tax return called a Form 709 and paid a 40-55% tax on any amount she had had over $600,000.  In 2001, the amount was raised to $1 million and was $3.5 million in 2009. 

In 2011, it was scheduled to drop back to $1 million.  They fiddled with a 2-year fix in December 2010, which raised the limit to $5 million until January 1, 2013, when it was again scheduled to drop back to $1 million. 

On January 1, this fiscal cliff deal gave us a ‘permanent’ limit of a bit more than $5 million, which will be inflation-adjusted yearly without further acts of Congress! 

We are delighted to have our everyday client conversations changed by this latest law.  For advice figuring out how this law change could remove old restrictions from your own estate plan, call our office at (815) 436-1996 for an appointment.  © 2013 Gruber Law Office, Ltd.

Jack has recently learned that taxes are maybe even more certain than death.  He is serving as the executor of his mother’s estate after her death last year. 

Not only does his mother, through him, have to file a final IRS Form 1040 annual tax return, he will have to file an IRS Form 1041 annual tax return for her estate, if there is income from her assets after her death (from interest, dividends, sales, or rent, for examples).

There is also a totally different tax return that could be required – but only if his mother’s assets add up to over $5 million.  It is IRS Form 706, which is the estate tax return.  Illinois would start collecting at $3.5 million.

Her ‘taxable estate’ is the combined value of everything she owned when she died and all taxable gifts she gave while alive.  She ‘owned’ everything she could have decided to give to anyone at the time of her death.  That includes – contrary to common belief – life insurance benefits, joint accounts, IRAs and almost any other thing of value. 

Shockingly, estate tax laws have actually improved for the 99% in recent years.  Of course, the New Year’s Eve/Day fiscal cliff tax compromise was long overdue.  But it was better than expected in the estate tax area, as we will explain next week. 

For advice figuring out what the IRS insists on knowing after death, and planning options to reduce after-death taxes, call our office at (815) 436-1996 for an appointment.  © 2013 Gruber Law Office, Ltd.

Jack is the personal representative who was appointed by the court for his mother’s estate after her death.  He’s worked hard to start the probate process properly. 

One of those early steps is to apply for an Employer Identification Number (EIN), which is a nine-digit number for IRS filing and reporting purposes, even though he will not be an employer.  It is sometimes called a TIN now (as in Taxpayer Identification Number), which refers generically to both EINs and social security numbers (SSNs).

His mother’s SSN must be used to file the tax return for the last partial year she was alive.  But as of the date of her death, any more income, such as interest, dividends or rent that her assets earn needs to be reported under the EIN Jack will obtain now.

Jack obtains it by completing an online IRS form, which has essentially replaced the old one-page IRS Form SS-4.  The questions on the form are customized to the earlier answers he gives online. 

It can be a bit of a maze, so it is useful to have the estate attorney or accountant actually type through the online form sitting right next to Jack.  So long as the IRS server is operating properly, the EIN is then created immediately, and the IRS letter ‘assigning’ the number can be printed out.

In theory, Jack could use the paper SS-4 form and apply by mail instead, and he would receive the number within about four to six weeks.

For legal and practical advice about simplifying required after-death procedures, call our office at (815) 436-1996 for an appointment.  © 2013 Gruber Law Office, Ltd.

As the official executor of his mother's estate appointed by the probate court, Jack needs to open a new checking account for the estate. 

He should transfer all of his mother's cash funds he can find to the new estate account. So Jack will close all of his mother's bank accounts and consolidate them in the one estate account. 

Jack should be careful to wait to close the original accounts and transfer them to the new one only after all the outstanding checks have cleared and the automatic withdrawals and deposits are cleared up. 

He should quickly notify the utilities and Social Security, who were set up for automatic withdrawals and deposits, about his mother's death and asked them to make the necessary adjustments and cancellations. 

The new estate account will serve to keep all estate money separate from Jack's own funds as required by probate law.  Used properly, it will also simplify keeping track of all estate expenses and deposits by having all financial comings and goings happening in one account. 

For help following probate procedures in your situation or to plan your estate to minimize or even eliminate probate, call our office at (815) 436-1996 to schedule an appointment.  © 2013 Gruber Law Office, Ltd.