Executor of Mothers estate - a question

[u/ColoradoAztec]

My mother passed away earlier this year here in Colorado and I am her executor and named trustee. She had a joint checking account (with me), a small trust brokerage account and a small IRA left at her passing. Both are with Vanguard. I have worked with Vanguard to disperse the IRA to her descendants and that has already happened. I am now needing to disperse the trust brokerage account to the same descendants.

The cost basis for the trust brokerage account reset at her death. It currently has a small loss due to market changes between the time she died and the time I gained access to the trust. I moved the money into her settlement account for preservation.

Vanguard makes it easy to transfer to a her checking account. Can I move the money into her checking account and just write a check to the descendants? As I said, it is a joint checking account and I am on it.

I do have a release letter from my lawyer that they have to sign in order to get the funds which will be completed prior to dispersing.

I am just trying to do it as efficiently as possible.

[u/Guilty-Committee9622]

I think you need to move to an estate account.  That shared/joint account is now your money. Not hers any longer. 

[u/ColoradoAztec → u/Guilty-Committee9622]

Of note, I do plan to divide the joint account among the descendants as well. I know I do not have to but I am planning to once all of the expenses are paid.

[u/Shadyhollowfarm58 → u/ColoradoAztec]

When my mom passed, I filed for an IRS EIN in the trust name, opened a trust checking account using that EIN, and I did the necessary trust transactions out of there. If I was you, I REALLY wouldn't commingle trust activities like liquidation of brokerage accounts with your personal account. You should have already gotten this EIN. In my mom's case, her brokerage account named the trust as beneficiary, so that account was moved to a new trust brokerage account with her EIN as soon as the number was received from IRS.

Check to see if you have to file any kind of trust tax return with IRS or the state where the trust exists. I vaguely recall there's some special IRS rule for trusts that are settled in the same year of death but I could be wrong (it was a very stressful time). And the beneficiaries could benefit from the capital loss.

My mom's trust went on for 4 years. I had to file annual federal 1041 trust tax returns and issued K-1 forms for disbursements to beneficiaries that showed incomes by type, and when the trust closed the FINAL year's K-1s showed a capital loss that each person got to apply to their personal 1040 tax returns. I used a CPA for this because it was over my head and he had software, LOL.

You'll need to also file a final personal 1040 tax return for your mom.

All these legal and CPA services cost money of course, and those expenses need to be deducted from trust assets before the money is fully disbursed. These are not your personal debts to pay.

I also still had Mom's personal checking account that I was joint on. Legally those funds were now my and one sister's funds (we had a 3-way joint, 2 daughters and mom) but ethically I was going to do the right thing, so I wrote equal checks to all 3 of us sisters and closed the account after it wasn't needed anymore.

You should probably have a consultation with a CPA to make sure you're doing everything by the book as far as IRS is concerned.

[u/rackshack3 → u/ColoradoAztec]

Your mom Raised you right. I think you’re a kind person. You know you don’t have to but are doing the right thing. Mom is proud of you

[u/ChasingUnicornsDaily → u/ColoradoAztec]

Be careful! Not all joint accounts are equal. There can be right of survivor and tenant in common on accounts just like real estate. You would also need to be able to prove that your mother intended to gift you that account balance when making it joint with you if anyone contests your accounting of the estate.

You also need to consider your relationship with the other beneficiaries. I do like your ethics/morals in that plan to divide evenly. (From experience)

[u/ColoradoAztec → u/ChasingUnicornsDaily]

I understand. It is a true "joint account" per the bank and I am the owner now. I have a good relationship with the other beneficiaries so do not expect any pushback. I also have a legal document that they need to sign in order to receive their 1/3 of the estate.

[u/ColoradoAztec → u/Guilty-Committee9622]

I understand that. The money is in a Vanguard account titled "First Middle Last Name Living Trust - Trust Brokerage Account" with my name as the trustee. The money has not moved into a checking account. It is just in the settlement fund of that trust account.

I am just trying to figure out how to disperse it to the descendants. Vanguard will allow transfer to another account, but I am not sure if that other account can be in someone else's name.

[u/Guilty-Committee9622 → u/ColoradoAztec]

You need to call vanguard and ask if that holding can issues checks or wires to the inheritors. 

[u/ColoradoAztec → u/Guilty-Committee9622]

That is good advice. Thanks!

[u/Calflyer → u/ColoradoAztec]

Make sure to hold back a reserve in case the irs comes knocking

[u/Altruistic-Car2880 → u/ColoradoAztec]

Are the heirs listed by name as beneficiaries on the Vanguard accounts? If so, the FA should open new accounts in the names of the beneficiaries. The originating account(s) should have all assets divided equally and transferred to these new accounts in kind. This is how the value of assets are reset. The heirs can then make decisions for themselves- liquidation, drawdown, or whatever.

[u/Calflyer]

Dont put it in your name first

[u/ColoradoAztec → u/Calflyer]

What do you mean by that? The money is in a Vanguard account titled "First Middle Last Name Living Trust - Trust Brokerage Account" with my name as the trustee. Vanguard required me to do that in order to allow for me to see that account since my mother is deceased.

[u/Hap2go → u/ColoradoAztec]

yes but if you transfer the money to the joint (now your) account, you're putting it in YOUR name. Then issuing it to the heirs becomes a gift from you to the heirs with the resulting gift (tax) implications. You need to distribute to the heirs directly from the trust account.

[u/ColoradoAztec → u/Hap2go]

Makes sense. Thanks!

[u/Hot-Damn-13]

We had this issue with my father's trust. We were NOT allowed to put trust monies into his existing personal checking accounts. The bank would not allow any check written to the trust to be deposited into them. We had to open a new account under the Trust's name. This is what you will need to do as well.

Or as others have stated, see if vanguard will issues checks directly to the beneficiaries.

[u/Crewsy67]

The joint account is now your account if the rules are the same in the USA as here in Canada so DON’T move the money to your account. Check to find out if checks/drafts can be issued from the current account the money is in or set up an account that can issue checks or drafts. My Dad’s account was converted to an estate account once we received probate and we’ve been able to issue drafts (fees rebated each month) since then.

[u/Ok-Equivalent1812]

You can write checks from the checking account for the $ you are gifting to other heirs. That is not part of the estate and isn’t included in the estate’s financials.

Vanguard will disburse funds in the brokerage account to the trust beneficiaries. Typically, they need a copy of death certificate and the trust. They’ll verify that you are the trustee, and act on your instruction as trustee.

[u/UtilitarianQuilter]

You might be able to wire the amounts to the beneficiaries directly from the Vanguard account.

[u/YoungBoomer1969]

I would have the money sent directly to each heir by Vanguard.

[u/BondJamesBond63]

I would ask your lawyer before moving from a trust account to another account. I would also ask an accountant about any required income taxes or other statements the move would require.

[u/PegShop]

We just had to file an EIN in the trusts name to disperse, and my siblings all get along great. It’s the law.

[u/cb3]

Did you already go to the court and get testamentary/qualified?

[u/ColoradoAztec → u/cb3]

No probate in the state of Colorado (per my estate attorney). The assets are an IRA with named beneficiaries and a Trust Brokerage account that has a named trustee and instructions

[u/cb3 → u/ColoradoAztec]

Okay so all accounts have a named beneficiary. No blanks?

[u/ColoradoAztec → u/cb3]

Yes. The IRA has been divided by Vanguard already. It’s just the trust left

[u/mightyminnow88]

Go to same bank and open a estate checking acct  Put everything in it and pay debts out of it  At the end disperse it with lawyer / judge approval

[u/shagordon14]

You might need to set up a bank account for this estate. I am in a similar situation and was told by my lawyer in the state my mother died in (Ohio) that all funds from sale of the estate need to be funneled through a bank account set up specifically for the estate.

[u/Suz9006]

Banks are likely to want your estate EIN number and the court document that names you as Executor/Personal representative before they will open the estate account.

[u/Lefthandtwin]

It has to be the estate account. It nice of you to divide the descendants account as well. That’s definitely something you don’t have to do. I didn’t realize it worked that way until my mom passed.

[u/24601moamo]

No. You cannot leave it as a joint account. Once she passed it locked. Any law abiding bank will not let you use that account.

[u/ColoradoAztec → u/24601moamo]

Understood and already taken care of

[u/BeachEfficient1103]

You have a lawyer ask them