Need to know how the asset was titled and the amount
For IRAs, need to know the beneficiary, Decide whether to do an "inherited IRA" or cash it in, Any account over $5,000 is usually done as "inherited IRA", Be careful of tax ramifications of this decision
For Life Insurance - Need to know the beneficiary
CDs, Bank Accounts- Need to know how asset was titled
Real estate- Check titling
Yes, then must file Form 706 within 9 months of death
No, then no estate tax return is needed
What causes a probate?, More than $100,000.00 in deceased's own name, Real estate in own name (not trust), No beneficiary on IRA or life insurance
If asset in deceased own name was less than $100,000.00 small estate affidavit will work
This is a less expensive option compared to probate
Original death certificates (as many as possible)
Original "pour over" will
Name, address, e-mail and SS# of trustee
Name, addresses, SS#'s, e-mail addresses of trust beneficiaries
Interest bearing account, Most trustees open a money market account with checkwriting
Non interest bearing account, If trust assets are low, it can be beneficial to open a non interest bearing account to avoid filing form 1041 (trust tax return)
Stocks, Mutual Funds, Brokerage accounts
Must first be retitled to name of successor trustee before anything can be done. Need a change of ownership form to do this. After retitling, stocks can be sold.
"Basis" or cost is the date of death, so capital gains taxes are minimal
Can be sold right away without being retitled
5% is maximum commission
Should be sold "as is"
Often a neighbor will by it "by owner"
Savings bonds, Tax is due on interest earned, See web site for a calculator http://www.publicdebt.treas.gov/sav/savcalc.htm
IRAs, Very tricky: If a beneficiary is named then an "inherited" IRA is set up and distributions are over the beneficiary's life expectancy
Annuities, Income tax is due on any gain over what the decease put into the annuity originally
This means the asset is not sold, but is distributed out of the trust to beneficiaries
Trustee prepares an accounting for the beneficiaries (An accounting is a list of income into the trust and expenses paid out) Beneficiaries have right to approve the accounting.
Trustee can either charge a trustees fee or waive it. "Normal" fee is $1,000 to $5,000. This is "income" to the trustee.
Once all assets are collected, checks are written to each beneficiary and a receipt is signed
"Holdback" The trustee withholds funds to pay income taxes on form 1041 and any other tax due on IRAs or savings bonds
The "holdback" usually double the amount we think will be due
The "holding account" is changed to non-interest bearing after the first distribution is made
Once the 1041 tax return is filed, a small second distribution is made to the beneficiaries and the account is closed.
Need death certificate to do this
Don't even THINK about doing a 1041 yourself
Hire a CPA- Rod Paquette in Palatine 847-934-8900 is a good one
Living trust can be taxed as an "estate" and use a fiscal year
Calendar year 1/1-12/31
"Simple trust" distributes all income to beneficiaries (shown by K-1 form), Most trusts are simple trusts if the trust "ends" and distributes to the heirs
"Complex trust" accumulates income in the trust (trust pays tax), This is usually a continuing trust that goes on for years
"Complex" trust tax rate- Trust pays tax, Trust tax rates are HIGHER than individual rates, 15% tax $0-$2050, 25% tax $2050-$4850, 28% tax $4850- $7400, 33% tax $7400-$10,050, 35% tax over $10,050
"Simple trust" tax rate- Individual pays at their own rate. Trust issues K-1 form and individual shows the income on 1040 personal return (always lower than trust paying), Individual tax rates are LOWER than trust rates, 10% tax $0-$7550, 15% tax $7551- $30,650, 25% tax $30,651- $74,000