Harry Gross answers 10 questions on the finances of dying
Over the last year, Daily News personal finance columnist Harry Gross has answered dozens of questions about all aspects of our financial lives. Many, though, have been about the almost-inevitable complications surrounding the finances of dying.
Here are 10 of those questions.
DEAR HARRY: I recently lost my brother. He was unmarried and had no children. I was named to administer his estate. My surviving brother is the only other heir. My deceased brother left substantial money and stock, which are easy to handle. They covered all of the estate's expenses and then some. He also left a house in an affluent area of Montgomery County. The house is not in good repair, and I have been told to rehab it before trying to sell it. The problem is that this will cost about $50,000. A real-estate broker who was my brother's neighbor told us that the rehab would add at least $100,000 to its value. My brother wants me to sell it now, as is. He won't bend. How can I get this resolved without a big fight?
WHAT HARRY SAYS: I'm sure you have tried to convince him with numbers and the statement of the neighbor. It may be worth another try. One possible solution is for the estate to give him the present value of the house in cash and for you to take title to the house and do the rehab. This may not be suitable for you if you cannot finance the rehab. You are the administratrix, and as such you have the power to decide what is to be done. As long as your figures are reasonable, your brother cannot stop you. However, there may be a cooling (to say the least) of your relationship.
DEAR HARRY: I hope you allow me to use your column as a way of expressing my rage at today's generation. Where do its members come off about their inheritance? We never would have asked our parents about how much they are leaving us in their wills. Remember, they raised you, educated you, saw that you had your medical care, often struggled to see that you had a happy childhood . . . all for 18 or more years. They helped most the child who needed it most. How about the cars, college costs, parties, weddings, etc.? And best of all, they gave you love and companionship, the best inheritance of all. Wake up to reality!
WHAT HARRY SAYS: Wow! The answer that I often hear in reply is: "I didn't ask to be born. You undertook all of these responsibilities with no input from me. Isn't one of those responsibilities to give me a little boost at the end?" Essentially, I'm on your side. However, many parents do as much as they can to leave some of their wealth behind (of whatever sort and amount). What gets to me most is the ungrateful child who would deprive an ancient parent in order "to preserve my inheritance." I have seen this in many cases, even where the child is better-off financially than the parent. I hope all parents remember that their wealth is for their well-being till they die.
DEAR HARRY: A friend of mine died last week. I agreed to be the executor of his will, and he did name me. I never saw the will before he died, so I had no way of knowing what it contained.
He was a widower and left no children or siblings. Everything was to go to a list of charitable organizations with a small bequest to me in lieu of an executor's fee. The problem is that one of the charities listed was an organization he hated. He even wrote letters to editors of newspapers clearly indicating his feelings. The last letter I'm aware of was as recently as March of this year. It's impossible to know how it got in there because the lawyer who drew up the will died a few years ago.
Before I make the distribution and get him spinning in his grave, is there a way out?
WHAT HARRY SAYS: That's a tough one! Once the testator has died, the will "gets carved in stone." I see one possibility, and that is to go to court to try to get a judge to allow the change. You'll need a barrel of evidence, including those letters to the editors. Backup data for his 1040s should indicate that he never donated to that organization before. Even with all of that, it is still possible that he wanted to make that bequest for some unknown reason. A remote possibility is that his lawyer or the lawyer's secretary "slipped it in there" without his knowledge. I don't have high hopes that you'll win. This is a lesson for all of us to read any documents carefully before we sign.
DEAR HARRY: My wife and I are getting on in years, and we're planning our estate.
We are not likely to exhaust our retirement accounts, so we have named our children as successor beneficiaries to our IRAs and 401(k)s.
I always had assumed that our kids would have to withdraw amounts from these plans based on their own life expectancies, but we recently were told that IRS rules would force them to look for the oldest person who could possibly be an heir (whether or not that person was actually an heir), and use that person's life expectancy to determine the Required Minimum Distribution.
If this is so, how can we protect our children?
WHAT HARRY SAYS: Some people don't make sure their brains are in gear before engaging their tongues.
Sometimes IRS rules are confusing or obscure, but not in this case. Your heirs will have their respective amounts in separate IRAs with a title including your name. For example: John Smith, deceased July 1, 2013, FBO (for benefit of) Mary Smith, beneficiary. They each will be required to withdraw based on their own life expectancies. IRS has a table for this.
In each succeeding year, they will reduce the original life expectancies by one to get the Required Minimum Distribution. Keep in mind that the beneficiary designated in your pension plan will supersede one named in your will.
DEAR HARRY: I have a number of questions regarding reverse mortgages at the time the homeowner dies. The family must handle the situation as soon as possible after the death, usually within 90 days. Agreements call for vacating the house so the lender can sell the house and recoup the loan. The lenders are very often uncaring and even ruthless. Is this provision of the mortgage binding on heirs? I am in the middle of a situation with a parent who died leaving a severely handicapped son who has never lived anywhere else. He has no place to go, and he has no one to help him. To make matters worse, the house is not worth the amount of the debt. Isn't there something that can be done, except to make this young man homeless?
WHAT HARRY SAYS: The mortgage agreement is binding on the estate of the decedent. This leads to some very unfortunate situations. However, just as some banks can be ruthless, some can be understanding and compassionate. That would be my first move: Visit the bank's chief loan officer and acquaint him with the situation. For someone who is severely handicapped, there are organizations for almost all handicaps that can and will help. He probably will have to leave the home, and that's very unfortunate, but he will not be homeless. Has he no family to help?
DEAR HARRY: My father died in November. As part of his estate, there is an IRA worth about $35,000.
My deceased mother was the primary beneficiary named in the IRA documents and in his will. My sister and I are contingent beneficiaries. My sister is 36 and I'm 24, so we have pretty different life expectancies.
Can we each roll over our share into our own IRAs? Must I use my sister's life expectancy for withdrawals because it's shorter? Are we required to withdraw all of it in five years?
We are both mixed up, and our lawyer is of no help. Please direct us.
WHAT HARRY SAYS: You have until Dec. 31 to split the IRA into two.
Do not roll them over to your own IRAs, or that will be treated as a withdrawal.
Instead, have them individually titled as "John Smith (deceased Nov. 10, 2013) IRA FBO Jane Doe beneficiary." Then you may each withdraw at least the required minimum distribution each year based on your own life expectancy.
This is an easy-to-follow rule that will keep you out of trouble with penalties. Your first distribution must be made before Dec. 31.
A number of regulations do not apply in your situation.
DEAR HARRY: Our widowed mother just passed away. She is survived by three daughters. Her will, which was signed back in 2011, left everything equally to my older sister and me. My younger sister got nothing. The lawyer who wrote the will told us he never knew that our mother had three daughters. We are at a complete loss to understand this since my younger sister was the one who did the most to care for her. Mother could not have read that will since she was almost blind.
Now to my problem. We want to make everything equal, three ways. The lawyer said that my mother may very well have had her reasons for not leaving our sister anything. We doubt that. We agreed to follow whatever you suggest.
WHAT HARRY SAYS: You have given me a lot of unwanted responsibility, but I feel very strongly that I am right. I understand fully what the lawyer has said, but there is good reason to agree with your doubt.
Moreover, the estate now belongs to you and your older sister. If you choose, you could give all to your friends or some charity, or just blow it at the casinos. Why should you not do what you think is right for your own sister?
Let me say further that I admire you for what you are doing. There are many who would find reasons for doing otherwise.
DEAR HARRY: I would like to report a crime. My son died 11 years ago. The life-insurance company never paid anything. I was so fouled up after his death that I didn't do anything. I always paid my premiums as required until I discovered the problem last month. The insurance company was collecting premiums from my paycheck for 11 years to which they were not entitled.
They are still investigating the authenticity of the death certificate and won't pay me the principal until that's done to their satisfaction. He was 34. What gives with these rich companies stealing from us poor working Janes and giving us the runaround? Help!
WHAT HARRY SAYS: Now, just a darn minute! The company did not know of your son's death until now. How could they have paid out the death benefit?
At 11 years after the death, the company is certainly right in wanting to be assured that you're not pulling off some kind of scam. Wouldn't you wonder about a claim delayed so long?
As to the premiums paid after he died, the company in no way did anything wrong. I'm sure you'll get them back - and you might even get interest on the overpayment. I think you were too quick in your condemnation. Most businesses are honest and try to do the best they can for their customers.
DEAR HARRY: My parents both died in 2013. My sister and I are the only survivors. Neither of my parents left a will.
My sister is familiar with a lot of financial stuff, so I agreed to let her be the administrator of their estates. That was my mistake.
She took over like a ball of fire without letting me know what was happening in advance. With April 15 approaching, I had no indication of how my tax return would be affected.
My tax preparer got an extension to file the return. I have called dozens of times. Now, she refuses to talk about it or anything else regarding the estate: "You'll get the information when I'm good and ready."
From what I recall my parents saying, I believe they owned just their home (which was sold in November), a few stocks and a lot of CDs. None of this seems complicated. Legal fees are pretty stiff. We were quoted $250 an hour for just a consultation. Is that the only way to go?
WHAT HARRY SAYS: I don't know what the problem is, but such delays cause me to worry about everything else related to the estate. I don't like to see family squabbles. Try one more phone call first. Legal fees are often stiff, but I think she'll straighten things out quickly once she gets a strong letter from a lawyer. Good luck!
DEAR HARRY: I'm 24 years old and a 2013 Temple grad. I have a good job in the suburbs. When I took out my student loans, I needed a co-signer, so I got my father to sign. Last week, I received a notification from my lender that my loan was in default.
Harry, I never missed or was late in any payment, so I called to find out what was wrong. It seems that I am caught on a hook because my father died in early June. I called everyone I know who was involved in the loan, but they would not budge. It is their practice to declare a default if the co-signer dies, goes bankrupt or gets a big credit-score hit. I solved the problem easily with my mother as the new co-signer. I'm sure my own score will take a big dive when they get wind of the default. Something has to be done about this. What's your take on it?
WHAT HARRY SAYS: Wow! I was unaware of this practice until I got your email. It appears that this is not unusual. I think it stinks to high heaven. At the very least, the borrower should be given some time, say 60 or 90 days, to get a replacement co-signer. This will require Congress to act. Such legislation should sail through because it's nonpartisan. Lean on your congressperson. This is an election year, and you should get cooperation.