Inheritance money

[Hot dog]

My mom passed away last month and I am trying to figure all this out. She was not so financial savvy so there is not much. she did have like $80,000 in a 401k and it is to be split 4 ways between me and my siblings. She left my sister in charge who also is not so financially savvy so that is a pain also. She seems to be doing Ok. I try not to get to involved. So what would you all do with the $. I am in the 25% tax bracket. I was thinking of just rolling it over so I don't have to pay any taxes and then maybe lowering my 401k contributions to the match so I can start a Roth.

She also had a $5,000 life ins. that I already got a check for. Will I have to pay taxes on this? She has another one for like $8,000 with my sister listed as the beneficiary. She is saying she doesn't know if she herself will have to pay taxes on it because it is in her name. That it doesn't matter that the will says it is to be split 4 ways cause she's the only beneficiary listed. She is stating it like she is some kind of saint or something "It is left to me only but I know mom would have wanted it for everyone so I am putting it into the estate." Is this true?

[sweeps]

Life insurance proceeds are usually not taxable, so no, you shouldn't have to pay taxes on the $5,000. If your sister is listed as the beneficiary of the other policy, then technically it is her money. Can't she just accept the $8,000 and give $2,000 each to her siblings, why feed it back to the estate?

Anyway, yes, putting the money into a Roth IRA would be a great idea if you are eligible. Make your 2007 contribution while you still have time. Then you'd still have 2008's contribution to make later.

[Hot dog]

So even though the will says everything is to be split the insurance money would be hers? I thought whoever you listed as the beneficiary would have to distribute it as the will says.
Do you have to pay taxes on any money she has? She has a cd worth like $16,000 to also be split 4 ways.

[disneysteve]

So even though the will says everything is to be split the insurance money would be hers? I thought whoever you listed as the beneficiary would have to distribute it as the will says.

Nope. Insurance proceeds go to the beneficiary. That money isn't counted as part of the estate. If your mom wanted the insurance divided 4 ways, she would have needed to designate 4 co-beneficiaries each getting 25%.

[Hot dog]

You see I am not so financially savvy either. I need to change my own insurance papers also. That is good to know. Maybe she is a saint. I am just a little leary as she has gotten over on different members of the family with money in the past. She is good in other areas it is just the money area that I don't trust her with. As much as I love my mom I couldn't trust her to do the right thing with money either. So do I have to pay taxes on the cd she has

[vsjhoc]

So sorry to hear of your loss.

[Hot dog]

Thanks I wish I could say it is getting easier. It has been a little over a month and right now it seems to be getting worse. I think there was just so much to do and lots of family around and now things are slowing down. My grandmother who has lived nearby her whole life just moved across country and my other sister who lived nearby with my mom was also moving out because the whole roof needed to be replaced all about the same time as the funeral. She was real sick the last couple months so I know she is in a better place.

[jIM_Ohio]

Was their a will? This is a HUGE issue.

There are 3 ways something passes onto a person when a person dies.

1) Through a spouse- may states have laws which state a spouse in herits assets when other spouse dies.

2) Through a beneficiary. 401ks and IRAs have beneficiaries. This means when a person dies, the benficiary inherits the asset. If your spouse is not the beneficiary of the 401k, they must sign a document to that effect on 401k forms.

3) Though a trust.

If none of the 3 apply, then more than likely the estate passes through probate.

You need to know if your mom has a will, otherwise if sibling is listed as 100% beneficiary, that money is theirs and you have no legal right to it. That person is responsible for all taxes on that money as well.

My suggestion is to find an estate attorney and pay $200 to sit down with them for an hour. Depending on what your mother's estate looked like (wills, trusts, beneficiaries), the attorney might be able to help.

For all other readers, this is why it's a good idea to have things taken care of before you leave this world. The people left behind will not be smarter than you.

[Hot dog]

She had a will and it just said that everything was to be split four ways between her children. My sis just said the 401k people will be sending me a statement at the end of the month asking what I would like to do with the money. The $5,000 policy was in all our names so they sent checks directly to us. This one is only in her name. I am assuming the 401k must list us all if they are sending a statement to all of us

[moneybags]

I would roll the 401K into an IRA (this is a new option for non-spouses that inherit 401Ks, you used to have to cash them out). You are going to have to take minimum distributions from the account, based on your age and the value of the account. They will be taxed each year. If you take your full share of the 401K out now, you will be taxed on that amount.

I'm pretty sure beneficiaries overrule what is written in a will. That is true for 401K plans, life insurance policies, etc.

[jIM_Ohio]

I would roll the 401K into an IRA (this is a new option for non-spouses that inherit 401Ks, you used to have to cash them out). You are going to have to take minimum distributions from the account, based on your age and the value of the account. They will be taxed each year. If you take your full share of the 401K out now, you will be taxed on that amount.

I'm pretty sure beneficiaries overrule what is written in a will. That is true for 401K plans, life insurance policies, etc.

One thing we did when we did our wills is CHECK the beneficiaries. A good attorney should lead you through that process.

[vsjhoc]

I'm pretty sure beneficiaries overrule what is written in a will. That is true for 401K plans, life insurance policies, etc.

Correct.

[Like2Plan]

My mom passed away last month and I am trying to figure all this out. She was not so financial savvy so there is not much. she did have like $80,000 in a 401k and it is to be split 4 ways between me and my siblings. So what would you all do with the $. I am in the 25% tax bracket. I was thinking of just rolling it over so I don't have to pay any taxes and then maybe lowering my 401k contributions to the match so I can start a Roth.

Hot dog,
I am so sorry for your loss.

I think you have a good plan going there.

I am putting together an information kit for my own family in case something happens to me. My advice to my non-spouse family members would be to roll the 401K directly into an inherited IRA.

I found this web site which describes the steps involved in order to establish one (Sounds kinda tricky)

401K to Inherited IRA

[Hot dog]

She is the oldest. I think my mom was just not informed that she should have made us all the beneficiary. I thought you could leave everything to one person and then have that person execute your will. I am going to change or add beneficiaries to my own assets. I am supposed to be receiving something from the 401k any time now so I'll see what they say about the rollover

[Thrif-t]

Hot dog, so sorry for your loss. We lost our mom in August, we are 5 kids. The will states everything is to be split 5 ways. My mom had transfer on death on all her accounts and all 5 of our names on everything. She had about 100k in taxable accounts that we inherited free and clear of taxes...I forget the number you can inherit tax free maybe 1 million? but don't quote me. She also had around 40k in an ira...that we all cashed out and had them withhold state and federal taxes out of our portions. If we had rolled it over into an inherited IRA we would've had to fiddle around taking required distributions every year....for my age around 150 bucks a year, I didn't want to mess with it. So for my part of the IRA 9k b/4 taxes I opened up a Roth IRA for me and one for my husband. The 20k I got from the taxable account I put in laddering CD's and when they come due I will take the money and add to our roths for the next 2 years. Good luck I know it's not easy going thru all this :-( and now we're trying to sell my moms house in this terrible market. Thank goodness she owned it free and clear..I think we may just auction it off once our contract is up w/the realtor because we just don't want to hold onto it and worry about repairs and upkeep.