I often get calls related to notices of probate proceedings or a notice from a Trustee about being a beneficiary in a Trust. Of course, the sadness and emotional experience of processing a loved one’s death is difficult, but at the same time, a feeling of thankfulness can be in the emotional mix when a loved one has left a gift to a beneficiary.
When I am working with a client to plan their estate, I always remind them that it is their money! They can do whatever they want with their funds, and no one is entitled to it until they pass away. Whatever remains is distributed to the persons or charities that were most meaningful and important to that individual. Does this get circumvented? Sure, that’s why we have elder abuse laws and methods to seek justice through the court system, but that’s another blog post!
Let’s return back to the initial phone call, “I just got this notice in the mail and it looks like I am getting some money from my great aunt.” The first question is what do I need to do? There are three things I always recommend to all my beneficiary clients. First and foremost send off a silent thank you. Like I mentioned earlier, no adult is ever entitled to an inheritance. The fact that you were named as a beneficiary says something about you and how the individual felt about you, honor that sentiment and give thanks.
Second, mark your calendar and include any dates that the notice provided so you can stay on top of the administration process. Regardless of whether you will receive the funds through a probate process or a trust administration it takes time. Assets need to be collected and liquidated, notices and statues have to run, final tax returns need to be filed and creditors need to be paid. Nothing goes out until the estate or trust is ready to be distributed. If your inheritance is being distributed through a Trust, that typically goes out a few months sooner than a probate. However, these things take time, so don’t spend your money before you have it in your hand.
Third, if you plan to disclaim your inheritance you need to be sure to do that in writing and delivered within the required timeframe. Sometimes, a parent wants to disclaim so the asset goes to their children. A disclaimer basically functions as if the named beneficiary pre-deceased the decedent. If you plan to disclaimer your inheritance or a portion of your inheritance you need to execute and deliver your disclaimer within 9 months of the date of death of the decedent or within 9 months of when the interest becomes indefeasibly vested. (Probate Code section 279).
If everything goes according to plan, the time has run, and you now have your inheritance. (If everything did not go according to plan hopefully, you were keeping track of deadlines and can get our firm involved to represent your interests to make sure things don’t get too far off-track.) You should have or will receive a K-1[1] from the Trustee or personal representative. A K-1 is used to report a beneficiary’s share of an estate’s or trust’s income, credits and deductions. Consider talking to a financial advisor about how to invest, spend and use this gift so that you are able to make the most benefit and enjoy the gift fully. But, as an estate planning attorney, I definitely believe you should set aside some of the inheritance to create your own estate plan. Taking care of your own estate plan and continuing on the generosity for the next generation is a way to honor the gift you received.
[1] https://www.irs.gov/pub/irs-pdf/i1041sk1.pdf
Contact Mauriah Conway, Esq. to assist you with all of your Estate Planning, Probate, and Trust Administration needs (916) 920-5983.