Before you die PSA

[pierogigirl]

My father died unexpectedly almost 2 years ago. We are just finishing up dealing with his estate. He must have set up his 401K when my brother and I were babies, because the beneficiary was listed as his estate. Don't do this.

Be sure you have named beneficiaries on retirement and other accounts that let you choose a beneficiary. Because of the way his 401K bylaws were written, my brother and I were not allowed to roll the funds into our own retirement accounts to defer the taxes or spread them out over a few years.

We are taking a bath paying all the taxes this year. I have to write the checks on Thursday and I'm not looking forward to it.

[simpsongal]

I'm so sorry for your loss, this is good advice. I put beneficiaries on my mom's annuity (like 401K). I figured it would be easier to avoid probate as well.

[Pom]

pierogigirl, I am very sorry for your loss. A very valuable PSA and so sorry this has to be so difficult for you.

[raangoli]

I am sorry for your loss - but thank you for sharing with us the impacts our actions can have down the road.

[noodleoo]

I'm sorry, pierogigirl. Thx for the advice.

Can I ask a question though? I thought minors can't inherit, so I can't list my kids directly as beneficiaries until they are 18. Is that right? I currently have my H as the beneficiary of all my accounts, but no secondary listed. Is there a better way to do it?

[chpmnk1015]

SO sorry for your loss and that you have to deal with all this as well.

[pierogigirl]

May 12, 2021 8:49:09 GMT -5 noodleoo said:

I'm sorry, pierogigirl . Thx for the advice.

Can I ask a question though? I thought minors can't inherit, so I can't list my kids directly as beneficiaries until they are 18. Is that right? I currently have my H as the beneficiary of all my accounts, but no secondary listed. Is there a better way to do it?

There might be a better way, but that is how we currently have it on our retirement accounts. My brother and I are in our late 40s, so my father had still listed the estate as the beneficiary long after we were adults. Because we had to liquidate the account all at once to share the money between us, instead of a rollover into two different accounts, we owe all the taxes at once. 

If my husband or I die before the kids are adults, the surviving spouse will have to make sure the beneficiaries are updated. We just had our estate worked on by an estate attorney, so hopefully our affairs are in order.

[pierogigirl]

kellady I didn't want to like, because of the circumstances. So liking in commiseration.

[goldengirlz]

I’m very sorry for your loss.

Our estate attorney told us the same thing. Name a beneficiary wherever you can name one (so 401ks and life insurance) and put assets in a trust only when it’s something like the house (and other bank accounts, I think.)

[AmyRI]

So sorry for your loss.

But... only spousal transfers at death do not get taxed as income. As a child, even named beneficiary, you would still have to pay taxes on it as income. You'd have had more options to spread it out (over 5 years or your lifetime) but it just saves you the liquidation headache with the estate and not the tax bill.

Definitely good PSA though. I was the named beneficiary on my father's IRA and that money became immediately available to me, no estate or probate headaches involved and it was hugely helpful when needing to pay for things to deal with the rest of the estate.

[tacokick]

I’m sorry for your loss! I’m wrapping up my mom’s estate now (she died in September) and the first thing I did was get my dad’s affairs in order. We literally were at the lawyers signing his new will this morning and then at the bank to assign a new beneficiary for his IRA.

My mom’s estate was “easy” but still a pain. I don’t want to have to deal with all this again!

[tacokick]

May 12, 2021 11:12:49 GMT -5 AmyRI said:

So sorry for your loss.

But... only spousal transfers at death do not get taxed as income. As a child, even named beneficiary, you would still have to pay taxes on it as income. You'd have had more options to spread it out (over 5 years or your lifetime) but it just saves you the liquidation headache with the estate and not the tax bill.

Definitely good PSA though. I was the named beneficiary on my father's IRA and that money became immediately available to me, no estate or probate headaches involved and it was hugely helpful when needing to pay for things to deal with the rest of the estate.

This all depends on your state’s individual laws. According to our lawyer anyway!

[pierogigirl]

May 12, 2021 12:40:47 GMT -5 tacokick said:

May 12, 2021 11:12:49 GMT -5 AmyRI said:

So sorry for your loss.

But... only spousal transfers at death do not get taxed as income. As a child, even named beneficiary, you would still have to pay taxes on it as income. You'd have had more options to spread it out (over 5 years or your lifetime) but it just saves you the liquidation headache with the estate and not the tax bill.

Definitely good PSA though. I was the named beneficiary on my father's IRA and that money became immediately available to me, no estate or probate headaches involved and it was hugely helpful when needing to pay for things to deal with the rest of the estate.

This all depends on your state’s individual laws. According to our lawyer anyway!

This is true. But, I'd rather pay it over time. I guess once it's done it won't matter either way, but it took two years to sort through it all because of the 401K. We sold the house and closed up all the other affairs over a year ago.

[gt7301b]

May 12, 2021 8:49:09 GMT -5 noodleoo said:

I'm sorry, pierogigirl . Thx for the advice.

Can I ask a question though? I thought minors can't inherit, so I can't list my kids directly as beneficiaries until they are 18. Is that right? I currently have my H as the beneficiary of all my accounts, but no secondary listed. Is there a better way to do it?

We have the beneficiaries listed as each of us first and then "a trust to be created upon our death" as the secondary beneficiary.  A lot of my accounts gave me some variation of this as an option when I modified them to include the trust.

[imojoebunny]

Sorry you are dealing with this on top of the loss of your father. We have a trust of some sort specifically for DH's retirement accounts (mine are not nothing, but not the big dollars in DH's), so that if we die, the kids won't have to take the proceeds over a short time (I think it was 5 years), which would be a tax nightmare. It cost an extra $1000 to set up, but if you have a good bit of money in your retirement accounts, it saves a lot more money to have the trust.

[fumbalina]

You also need to update the beneficiary if the named person pre-deceases you. My father passed away this year and all of his accounts named my mother as beneficiary (who died 13 years ago). I don't know how long this is going to take to clear up.