How to put a TOD asset into the estate

[Treu]

Jurisdiction

Oregon

I was just advised that I am co-executor of my uncles will. The other co-executor had advised him to to set his investments up to transfer on death to her so she could avoid probate. There are no assets available to satisfy my uncles wishes as set forth in his will unless the co-executor puts the $250000 into the estate somehow.

 

[Zigner]

Is your uncle alive?
The assets of the estate will be used to pay any creditors prior to any of your uncles bequests. If there are not enough assets to cover some (or all) of the them, then they won't be fulfilled.
The TOD designation on the various assets mean they go directly to the beneficiary and are not controlled by the will.

 

[Treu]

My uncle passed away three weeks ago and my cousin presented me wth a copy of his will showing me as co-executor along with her. I was aware of my uncles wishes for his estate because we had discussed them many times. The will accurately reflected those discussions. I did not know that my cousin had advised him to make her the beneficiary of his investments. I believe her intent was not to circumvent his wishes. I think she saw it as a way to streamline a process that she did not understand. However the money is now legally hers and she wants to divide it up as per my uncles will. My uncle had no heirs. His will will need to be probated because he had real property which exceeds the small estate threshold. The real property is left to myself, the co-executor cousin and another cousin while the remainder of the estate was to be divided amongst all 6 of his nephews and nieces. So my question: is there a way for my cousin to put the money back into the estate. As a side note the co-executor shared the will with everybody and as a result there are already hard feelings and they don't even know that the money is not in the estate.

 

[Zigner]

My uncle passed away three weeks ago and my cousin presented me wth a copy of his will showing me as co-executor along with her. I was aware of my uncles wishes for his estate because we had discussed them many times. The will accurately reflected those discussions. I did not know that my cousin had advised him to make her the beneficiary of his investments. I believe her intent was not to circumvent his wishes. I think she saw it as a way to streamline a process that she did not understand. However the money is now legally hers and she wants to divide it up as per my uncles will. My uncle had no heirs. His will will need to be probated because he had real property which exceeds the small estate threshold. The real property is left to myself, the co-executor cousin and another cousin while the remainder of the estate was to be divided amongst all 6 of his nephews and nieces. So my question: is there a way for my cousin to put the money back into the estate. As a side note the co-executor shared the will with everybody and as a result there are already hard feelings and they don't even know that the money is not in the estate.

Your sister is free to gift the money.

 

[zddoodah]

I was just advised that I am co-executor of my uncles will.

My uncle passed away three weeks ago and my cousin presented me wth a copy of his will showing me as co-executor along with her.

Just FYI, you and your cousin are not co-executors until a court has confirmed you as such. Until that happens, you are merely nominated to be executors.

Also, is your cousin your uncle's daughter?

The other co-executor had advised him to to set his investments up to transfer on death to her so she could avoid probate. There are no assets available to satisfy my uncles wishes as set forth in his will unless the co-executor puts the $250000 into the estate somehow.

the money is now legally hers and she wants to divide it up as per my uncles will.

OK.

My uncle had no heirs.

Why do you think that? Why do you think you and your cousins are not heirs?

So my question: is there a way for my cousin to put the money back into the estate.

She can't put it back because it was never part of the estate to begin with. It's her money, and she is free to gift it to the estate if she wants.

Allow me to suggest that you and your cousin would be foolish to handle this without legal counsel.

 

[Tax Counsel]

She can't put it back because it was never part of the estate to begin with. It's her money, and she is free to gift it to the estate if she wants.

As written you are, of course, correct. But I think it leaves the wrong impression because there is another way to do it: she can disclaim the assets she got with the transfer on death. If there were no secondary TOD beneficiaries named then the money would go to the estate instead. This avoids having to make a gift to the estate, with the gift tax consequences that would go along with that.

Allow me to suggest that you and your cousin would be foolish to handle this without legal counsel.

Agreed. The attorney can look everything over and determine if a disclaimer will achieve what they want and can help with the disclaimer or whatever other steps might be needed.

 

[adjusterjack]

This avoids having to make a gift to the estate, with the gift tax consequences that would go along with that.

Am I right in saying that the gift tax consequence would be the filing of a gift tax return but that there would be no tax as long as her life time gift giving didn't exceed the life time gift tax exclusion?

Which is currently $11,700,000 (2021). Even if Mr Potato Head gets that down to $3,500,000 there's still plenty of room to limit gift giving over a lifetime.

However the money is now legally hers and she wants to divide it up as per my uncles will.

That money has nothing to do with the estate. If she wants distribute her money then all she has to do is write checks in the appropriate amounts to the appropriate people and not lose any sleep over it.

 

[Treu]

Just FYI, you and your cousin are not co-executors until a court has confirmed you as such. Until that happens, you are merely nominated to be executors.

Also, is your cousin your uncle's daughter?





OK.



Why do you think that? Why do you think you and your cousins are not heirs?



She can't put it back because it was never part of the estate to begin with. It's her money, and she is free to gift it to the estate if she wants.

Allow me to suggest that you and your cousin would be foolish to handle this without legal counsel.

Thank you for your response/s. I was not careful in my reply. Yes we are only nominees at this point and have not been sworn in. We are taking a couple of days to decide whether we even want to act as personal representatives. Yes, I did not mean there were no heirs. I meant he had no wife or children. I was looking for the answer that she could disclaim the assets. We had already figured out that the three who stand to inherit the real property could refuse it. Just gathering information so we can discuss the issues intelligently with a lawyer.

 

[Zigner]

Thank you for your response/s. I was not careful in my reply. Yes we are only nominees at this point and have not been sworn in. We are taking a couple of days to decide whether we even want to act as personal representatives. Yes, I did not mean there were no heirs. I meant he had no wife or children. I was looking for the answer that she could disclaim the assets. We had already figured out that the three who stand to inherit the real property could refuse it. Just gathering information so we can discuss the issues intelligently with a lawyer.

You need to also check the process required with the financial institution in question.

 

[Tax Counsel]

Am I right in saying that the gift tax consequence would be the filing of a gift tax return but that there would be no tax as long as her life time gift giving didn't exceed the life time gift tax exclusion?

Correct. The problem is that we don't know what will happen in the future: what changes will happen to the unified credit, what assets she'd have in the future, etc. Thus, if there is an easy way to avoid using the credit (like doing a disclaimer) and achieve the same goal it's worth doing. It might save tax later on. And it might save the extra burden of doing a gift tax return next year.

 

[welkin]

The only asset of the estate is the real property that will have to go through probate. The co-executor can pay the costs of probate and the debts of the estate and charge the estate.

If she wants to distribute to the named heirs in the will, it would be a gift.

It sounds like the assets have already been transferred so there is no going back to denounce the bequeath.

How long does it take to fill out a gift return? Maybe 10 minutes?

It's not as complicated as most of you are making out to be.

I did the same thing by making my executrix the TOD on all brokerage and bank accounts. The real estate and other personal property will have to go through probate but the administration of the will and the debts will be paid with her money after receiving the TOD accounts. She then charges the estate for the expenses after the property is sold.

 

[Tax Counsel]

How long does it take to fill out a gift return? Maybe 10 minutes?

Longer than that unless the taxpayer is pretty familiar with doing them and doesn't have many gifts to report. I'm guessing that you haven't many, if any, federal gift tax returns.

It's not as complicated as most of you are making out to be.

It's not the complexity that is the real issue here. It's the possibility that the cousin may use up some of her federal estate and gift tax unified credit unnecessarily. If she can avoid that by disclaimer, that is what I would recommend she do. Disclaimers are easy to do, and might save her (or her estate) tax later down the road.

 

[welkin]

I'm guessing that you haven't many, if any, federal gift tax returns.

You would be incorrect in your guess (if any). Maybe one or two that exceeded the annual limit. But to be fair, I don't do my own tax returns. I have used the same account for the last 27 years

It's not the complexity that is the real issue here. It's the possibility that the cousin may use up some of her federal estate and gift tax unified credit unnecessarily. If she can avoid that by disclaimer, that is what I would recommend she do. Disclaimers are easy to do, and might save her (or her estate) tax later down the road.

Since it was the cousin that requested the TOD designation, a disclaimer would be contrary to the request.

.

 

[Tax Counsel]

Since it was the cousin that requested the TOD designation, a disclaimer would be contrary to the request.

Doesn't mean the cousin couldn't now do a disclaimer if she decided that provided a better way to achieve what they want to do. Now whether a disclaimer is still possible to do at this point is another matter, and that's unclear from the facts we have. But I mentioned it as an option to at least consider. If it's possible to avoid using up some of the unified credit, that's something worth them looking into.