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Consolidating estate of parents in declining health
Posted on 5/7/13 at 7:07 am
Posted on 5/7/13 at 7:07 am
Soliciting tips and input from folks who have traveled this path.
Back story: My wife’s mom is losing a battle with cancer and is not long for this world. Her dad’s health is poor, and he’ll likely end up living with us as he will not thrive on his own. My mother-in-law is a small business owner, so there’s inventory to liquidate. House needs upgrades prior to renting / selling. All money generated by consolidation will go to my father-in-law and his care, and then eventually to my wife and her brother.
My wife will do the heavy lifting on this, with minimal input from her brother. She’s savvy – money-smart and very organized – but has never done anything like this before. Are there certain procedural things she should be aware of? Should she set up a separate account for the money generated (from liquidation) and spent (home improvements) during this process? How tax liabilities from liquidation are best handled? What else am I not thinking of?
My concern is that everything be perceived as above board – which I’m certain it will be – by her brother who ultimately has a vested interest in the financial outcome of this process. The last thing we need is a petty rift in the family over money during a significant emotional stressor.
TIA
ETA: Thanks to admins for moving to MT and deleting asinine OT post
Back story: My wife’s mom is losing a battle with cancer and is not long for this world. Her dad’s health is poor, and he’ll likely end up living with us as he will not thrive on his own. My mother-in-law is a small business owner, so there’s inventory to liquidate. House needs upgrades prior to renting / selling. All money generated by consolidation will go to my father-in-law and his care, and then eventually to my wife and her brother.
My wife will do the heavy lifting on this, with minimal input from her brother. She’s savvy – money-smart and very organized – but has never done anything like this before. Are there certain procedural things she should be aware of? Should she set up a separate account for the money generated (from liquidation) and spent (home improvements) during this process? How tax liabilities from liquidation are best handled? What else am I not thinking of?
My concern is that everything be perceived as above board – which I’m certain it will be – by her brother who ultimately has a vested interest in the financial outcome of this process. The last thing we need is a petty rift in the family over money during a significant emotional stressor.
TIA
ETA: Thanks to admins for moving to MT and deleting asinine OT post
This post was edited on 5/7/13 at 10:58 am
5
Posted on 5/7/13 at 7:22 am to GarmischTiger
From experience and not talking out my butt on this.
1. If your wife can truly handle it, let her. No matter how long you have been married, despite what you may think, you are an "outsider" to other family members when $$$$ comes into play. My wife can't handle money and the rest of the family lives across the country. I went out of my way to take care of several small matters (closing credit accts, paying property taxes) and kept everyone informed of every step. Next thing you know, I am being accused of all kinds of crazy shite. Later on talked with others who encountered the same thing. Money and grief makes sane people crazy.
2. Keep immaculate records of everything. I did and it helped when I was accused.
3. Be ready for the tax man. The Gov has to get theirs one last time..
1. If your wife can truly handle it, let her. No matter how long you have been married, despite what you may think, you are an "outsider" to other family members when $$$$ comes into play. My wife can't handle money and the rest of the family lives across the country. I went out of my way to take care of several small matters (closing credit accts, paying property taxes) and kept everyone informed of every step. Next thing you know, I am being accused of all kinds of crazy shite. Later on talked with others who encountered the same thing. Money and grief makes sane people crazy.
2. Keep immaculate records of everything. I did and it helped when I was accused.
3. Be ready for the tax man. The Gov has to get theirs one last time..
Posted on 5/7/13 at 7:57 am to GarmischTiger
Make sure there's understanding on what your wife gets, as well as her brother. He'll let her do all the work, and expect more than his share.
Posted on 5/7/13 at 8:11 am to GarmischTiger
How is the business owned? Do your parents complete a Schedule C for your mom's business on their taxes?
Posted on 5/7/13 at 8:11 am to GarmischTiger
I am interested in this thread as well, because both of my parents are well into their 80's. They don't get around like they used to (duh). My sister and I are working together on most decisions, I just want to keep the government's greedy paws off of what little they have.
Posted on 5/7/13 at 8:17 am to Polycarp
Unless you live in a state with a state estate tax or your parents combined net estate is over $10.5 million then you don't have to worry about estate taxes.
Posted on 5/7/13 at 8:17 am to MSTiger33
quote:I'm not entirely sure. MIL is a custom jeweler who works (worked) out of a workshop in the home. Lots of inventory (~$150-250K), but no building to vacate.
How is the business owned? Do your parents complete a Schedule C for your mom's business on their taxes?
Posted on 5/7/13 at 8:26 am to GarmischTiger
liquidating the business assets will be difficult. Basically need to account for every single thing that is owned under that "company".
Also make sure that your wife has power of attorney over all accounts to do with the business and the personal financials. Make sure once the mom dies the estate is succeeded to the father. Then once he passes he succeeds it to your wife as executor of the estate. Usually the estate will have an account that will take all remaining funds and settle outstanding debts from it. Whatever is left, that's what you guys take home. Uncle Sam will get his piece next tax season.
Also make sure that your wife has power of attorney over all accounts to do with the business and the personal financials. Make sure once the mom dies the estate is succeeded to the father. Then once he passes he succeeds it to your wife as executor of the estate. Usually the estate will have an account that will take all remaining funds and settle outstanding debts from it. Whatever is left, that's what you guys take home. Uncle Sam will get his piece next tax season.
Posted on 5/7/13 at 8:30 am to GarmischTiger
Check your parents latest tax returns. More than likely there should be a Schedule C for the business. If you liquidate the business then the accountant will account for any gain/loss on Schedule C for the next tax return.
In regards to your father, since his health is poor there is really no point to gifting his assets to qualify him for medicaid since most states have a five year look back period. Medical care is expensive and can eat up a person's assets fairly quickly.
Does your mom have a will and/or trust right now? If so, how are the assets owned (e.g. Jointly)? Is there any life insurance? If so, is there a life insurance trust?
In regards to your father, since his health is poor there is really no point to gifting his assets to qualify him for medicaid since most states have a five year look back period. Medical care is expensive and can eat up a person's assets fairly quickly.
Does your mom have a will and/or trust right now? If so, how are the assets owned (e.g. Jointly)? Is there any life insurance? If so, is there a life insurance trust?
Posted on 5/7/13 at 8:51 am to Geauxld Finger
quote:
Also make sure that your wife has power of attorney over all accounts to do with the business and the personal financials. Make sure once the mom dies the estate is succeeded to the father. Then once he passes he succeeds it to your wife as executor of the estate. Usually the estate will have an account that will take all remaining funds and settle outstanding debts from it. Whatever is left, that's what you guys take home. Uncle Sam will get his piece next tax season.
This is what I had to do. My brothers and sisters did get together along with our Mom. Being that I lived close, they all agreed to me as POA over everything.
Also, any and all moneys were put into a estate acc. It took myself and my little sister to write checks for any bills. All books were open for any of the family at any time and when time came to make the call for treatments for our Mom, all family members were called before hand.
Our Mom passed away two years ago and we still have the estate acc. We use the moneys to pay land taxes and flowers for our Mom and Dad's grave every holiday/there birthdays, ect.
It's there money and we feel it should be used for them however long it last.
Posted on 5/7/13 at 9:37 am to Geauxld Finger
Solid info from last three posts - many thanks.
I'll do some homework (answer the questions above)and may return with some more questions based on what I find.
Thanks again, all.
I'll do some homework (answer the questions above)and may return with some more questions based on what I find.
Thanks again, all.
Posted on 5/7/13 at 10:08 am to GarmischTiger
Does any asset have a large capital gain? Pay attention to any strategy that may benefit the spouse or heirs due to step up in cost basis at death.
Posted on 5/7/13 at 10:29 am to GarmischTiger
Your MIL needs to consult with an estate planning attorney. He will be able to help her arrange her affairs to prevent acrimony among family members, by spelling out your wife's role in administering her affairs, while making sure her estate is utilized in the manner she desires. If set up properly any estate tax tour MIL might owe can be deferred until your FIL passes away.
Do the same for your father to get the necessary documents allowing you to make decisions on his behalf.
Do the same for your father to get the necessary documents allowing you to make decisions on his behalf.
Posted on 5/7/13 at 10:40 am to GarmischTiger
In addition to all the other good advice submitted KEEP RECEIPTS FOR EVERYTHING.
Even essential items you pick up for them and reimburse. This adds up when the elderly can no longer keep up a checking account.
Even essential items you pick up for them and reimburse. This adds up when the elderly can no longer keep up a checking account.
Posted on 5/7/13 at 10:49 am to Breadcrumbs
quote:I'm not sure - define "large".
Does any asset have a large capital gain?
MIL owns the house (~$200K) outright - she bought it 40 years ago just prior to meeting my FIL. Actually "outright" is not accurate as she's refinanced lately.
The bulk of her worth is the jewelry inventory as noted above.
This post was edited on 5/7/13 at 10:54 am
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