My parents passed away recently; father in December and mother in March. I am the only child. I found their will and it leaves the "residual estate" to me and my daughter (50-50). My parents had several annuities of which I am the sole beneficiary. My parents and I were co-owners of a few savings accounts. The funds in these accounts go to the surviving owner, which is me. I consulted an attorney and she said that the annuities and the savings accounts are not part of the "residual estate." The policies that have no beneficiaries need to be shared through probate. So in essence I legally inherit the bulk of the estate. How do I share some of the money with my daughter?
"A residuary estate, in the law of wills, is any portion of the testator's estate that is not specifically devised to someone in the will, or any property that is part of such a specific devise that fails. It is also known as a residual estate or simply residue.
The will may identify the taker of the residuary estate through a residuary clause or residuary bequest. The person identified in such a clause is called the residuary taker, residuary beneficiary, or residuary legatee. Such a clause may state that, in the event all other heirs predecease the testator, the estate would pass to a charity (that would, presumably, have remained in existence). If no such clause is present, however, the residuary estate will pass to the testator's heirs by intestacy. At common law, if the residuary estate was divided between two or more beneficiaries, and one of those beneficiaries was unable to take, the share that would have gone to that beneficiary would instead pass by intestacy, under the doctrine that there was no residuary of a residuary. The modern rule, however, is that the failure of a residuary gift to one beneficiary causes that beneficiary's share to be divided among the remaining residuary takers."
I don't really understand any of that, but I hope someone comes along who does.
My deepest sympathies, Demstress. May the memory of your mother and father be a blessing to you and your daughter.
Thank you for your expression of sympathy. My parents are always in my thoughts and prayers. They lived with me so it is hard.
Now I have to deal with the legal aspect of their estate. No matter how many times I read what a residual estate is, I just don't understand it. The attorney was clear in her explanation but then I read what it says above and I get confused again.
Basically, the residual estate is really just anything that has not, legally, already, in writing, been designated to go to someone specific.
So, for a very simple example: if you had an IRA Account, you would have been asked, when you established it, to designate a beneficiary and, when you die, the beneficiary would bring a certified copy of the death certificate to the bank (or brokerage firm) and the IRA account would be transferred to the beneficiary; outside of probate.
I have some advice for you. Get the estate through probate, and then wait 6 months before doing anything about "sharing." Unless, of course, there is personal property to be divided. Take a break. Ideally, don't do anything about "sharing" until 2020, because that's a new tax year. Make life easier for yourself.
If your daughter needs funds and you want to "share" to help her, then ask your attorney how to do that, with your daughter, in writing, so that it's not a "gift." Not that you would absolutely trigger a gift tax, but a gift would be reportable.
Make a list of what and how much you are going to get because you now own it automatically, and what and how much you will share with your daughter from the policies with no beneficiaries. If you want more to go to your daughter, it is not an issue under the estate, it is a quite separate matter of how and when you give it to her. For example, your attorney might suggest that it would be more economic to put it into a trust rather than giving it to her outright, or you might decide that the gift tax is not enough to bother about and just make it a straight gift. It all depends on the $. If you want some to go to your daughter immediately, perhaps you could make it a loan from you to be repaid out of the amount that your daughter will inherit from the policies with no beneficiaries. Probate can take a long time!
This is all much less complicated than it sounds. Just work out the figures, and don’t feel pressured. Unless there is personal estate that is really valuable (eg a collection of famous paintings), or a family fighting for every last penny, an executor normally agrees how to deal with the bits and pieces left behind – gifts to family members and friends, the rest goes to an auction house and the proceeds go into the estate, and what the auction house won't take goes to charity. You have enough on your plate to deal with the deaths of your parents, for which I give you my sympathy. There is no great hurry. Best wishes, Margaret
Go back to her and ask her to tell you exactly which accounts contain monies that need to be shared and how to best disburse the money to your daughter.
In the case of my moms estate, my brother was the executor and he was advised to open a checking account that was titled with the estates name i.e. The estate of Jane Doe. All of mom's other cds and savings were liquidated and placed into this account and all legal fees, taxes and inheritances were paid from this account.
I think that's what you are asking, yes?
Make sure that you engage a tax advisor (paid for by the estate) to prepare all the tax forms that need to be filed. And make sure that your daughter and you set aside and prepay income tax on any inheritance that is taxable. This varies from state to state and is also dependent upon whether any of the money was in tax deferred accounts.
Paying for legal and tax advice is the right thing to do. This is not a do it yourself project!!
If the estate is sizable and your daughter (or you) need investment advice, there is a wonderful site at www.bogleheads.org.