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Old 05-09-2015, 07:01 AM
 
678 posts, read 849,748 times
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I have an 89 y/o mother who is in complete control of all her faculties. She recently moved into an assisted living facility near me. She needs some medical assistance but other than that she's fine. She no longer wants to take care of her finances & bills. She has become a little anxiety ridden with all of it and is getting overwhelmed. She wants to just enjoy herself now and have me take care of her. With that in mind, she has most of her money in a brokerage firm. She's used this firm for as long as I can remember. The man who she first started to invest with was a childhood friend. His children have taken over the practice and even their children are there. We are very comfortable with leaving it where it is as they oversee the account and my mom checks it regularly. I have always been on as secondary. My name is on account but mom is primary and pays the taxes, etc. She recently went ahead and took her name off the account and made me primary.

Yesterday we went to an elder care attorney to re-write her will now that she's a widow again. No big changes at all, as things are just split evenly between siblings. BUT, attorney told us that my mom never should have taken her name off of that account. That I have to declare it and pay taxes on it and if she were to put it back on her name than it would just automatically come to me at the time of her death and I wouldn't pay any taxes on that. She advised me to call my CPA as she wasn't sure.

I called my CPA. He was shocked that an elder care attorney (estate planning) wouldn't have the answer. He stated that he didn't get involved in this and wasn't sure what to do at this point.

So, here I am asking the professionals! Advice? Thanks in advance.

BTW, the account is an income generating fund that supplements her monthly expenses.
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Old 05-09-2015, 08:02 AM
 
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You are talking about the gift tax. Gifts can be given in amounts up to $14,000 for 2014 and 2015 per person (Spouses are not included in this figure).

My suggestion would be that you contact a tax attorney. Additionally, you might find an Enrolled Agent (NAEA | Powering America's Tax Experts) who knows the answer too. Enrolled Agents have taken the IRS' exam to become Federally recognized as a tax expert. The IRS's exam is difficult to pass and is solely focused on income tax laws; whereas the CPA exam is focused on auditing procedures and financial accounting rules.

I'd try talking to a tax attorney first.
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Old 05-09-2015, 07:27 PM
 
Location: Florida
4,437 posts, read 3,780,263 times
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The CPA is probably not skilled in taxes. Keep looking. Some CPA's also have certification in financial planning. Try your state CPA organization for referrals.

The attorney was correct that this was a mistake. I would consider going back to the broker and put everything back in her name. I do not have practical experience in this so best to find a CPA or Tax attorney to advise you on the risks.

There are a lot of reasons why this was bad. But the good news is if the account was less than 5 million your mother can file the gift tax return and owe no taxes. This should not be an expensive deal. Search the internet for more background. Look up form 709 and instructions for gift taxes. http://www.irs.gov/pub/irs-pdf/i709.pdf[/url]

Note you will pay the capital gains tax and income tax if you do not correct this.
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Old 05-09-2015, 10:20 PM
 
Location: Phoenix, AZ > Raleigh, NC
15,167 posts, read 19,221,592 times
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Not quite correct. Mom's ENTIRE ESTASTE will have to be below $5.43 million to avoid federal estate tax in 2015. State death tax is a totally different subject.

Assuming no miscommunication, you should fire that CPA.

Elder care attorneys are NOT the same as estate planning attorneys. Similar, but not the same. My analogy would be a neurologist and a neurosurgeon.

For your purposes, and mom's, you want a certified estate planning attorney. I've dealt with 5+ certified estate planning attorneys in my life. All but one were also CPA's. Never had a need to hire a CPA for estate planning. And I'm an ex-accountant!!!!
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Old 05-11-2015, 10:57 AM
 
678 posts, read 849,748 times
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Thank you. I just never realized the implications of all of this. And I'm a little peeved (or shouldn't I be?) that no one at the investment firm mentioned this to any of us. I thought they would have some knowledge as well and just clue us in to research it first and why. After all, they were childhood friends, this isn't just a business acquaintance.

I have a call out to them today to see about transferring it back into her name. I also contacted an estate planning attorney. I thought an elder care attorney was the same thing. Oh well, live and learn.

Again, thank you for the advice.
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Old 05-11-2015, 09:11 PM
 
Location: Florida
4,437 posts, read 3,780,263 times
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Quote:
Originally Posted by saralvr View Post
Thank you. I just never realized the implications of all of this. And I'm a little peeved (or shouldn't I be?) that no one at the investment firm mentioned this to any of us. I thought they would have some knowledge as well and just clue us in to research it first and why. After all, they were childhood friends, this isn't just a business acquaintance.

I have a call out to them today to see about transferring it back into her name. I also contacted an estate planning attorney. I thought an elder care attorney was the same thing. Oh well, live and learn.

Again, thank you for the advice.
I agree they should give you a heads up that you should check gift taxes etc. before doing it. Maybe they do not know but I think they should even if they learn it on their own.

By the way this is a very common mistake so it should not surprise the employees.
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Old 05-12-2015, 06:19 AM
 
30,356 posts, read 47,638,735 times
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Personally, I have no doubt that the investment guy we use (CPA) who is partner in local CPA firm we have used for 30 years to do our taxes, personal and business, would definitely have had input into renaming of any of our accounts...and would have made us knowledgeable of the tax/estate liabilities of any change...
it is HIS fiduciary duty to do so---
I can't believe the firm your mother's account was at would allow you to do what you did w/o any discussion of the tax and estate implications...
Are any of them CPAs?

and since you posted that your mother's estate was to be shared equally among siblings, do THEY know what removing your mother's name from that account meant for her estate and their inheritance???
Do you have a power of attorney from your mother to act on her behalf in writing or just verbal agreement?
I think this could turn into something unpleasant if your fiduciary ability/capacity is questioned by your siblings--
I don't know that it matters how large the account is -- but this senario could really be misconstrued as something much more nefarious than it was...if people's emotions become involved...
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Old 05-12-2015, 03:35 PM
 
Location: Baltimore, MD
3,755 posts, read 4,249,688 times
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Quote:
Originally Posted by loves2read View Post
<snip>...and since you posted that your mother's estate was to be shared equally among siblings, do THEY know what removing your mother's name from that account meant for her estate and their inheritance???
Do you have a power of attorney from your mother to act on her behalf in writing or just verbal agreement?
I think this could turn into something unpleasant if your fiduciary ability/capacity is questioned by your siblings--
I don't know that it matters how large the account is -- but this scenario could really be misconstrued as something much more nefarious than it was...if people's emotions become involved...
I believe OP is well aware that she will inherit the majority of her mother's funds about her mother's death.

"With that in mind, she has most of her money in a brokerage firm" and "That I have to declare it and pay taxes on it and if she were to put it back on her name than it would just automatically come to me at the time of her death and I wouldn't pay any taxes on that."

I don't know if OP can negate the damage by transferring the funds back to her mother. Or would this be considered regifting? Given that this transfer would have huge implications if Mom eventually needs Medical Assistance, I sincerely hope there is a painless "redo".

That said, I can confidently say that I would be the first to run into court if one of my siblings were to receive the majority of an inheritance because she became a co-owner of the account OR was the only named beneficiary. Undue influence, blah blah blah.
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Old 05-12-2015, 06:14 PM
 
678 posts, read 849,748 times
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The money is going to be put back into my mother's name. I was joint on the account and that's how it will be again. The papers are being sent to her and we will sign and send them back and hopefully this will all be taken care of within the month. They said 10 business days after they receive it back signed.
I have no idea if this is re-gifting or any implications but from what I've been told if it's done pronto we should be fine. The broker called me at length this morning and seemed to feel if this is done quickly there will be no penalties. I guess we'll see. Lesson certainly learned.

As for my siblings, they are very well aware of my being on this account. I've been on it for years. There will be absolutely no problems when mom passes. I account for everything I spend on her and keep a log. No one ever wants to even see it. I pay all her bills and document it all. When the time comes things will be divided up equally.

Hopefully this all goes smoothly.
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Old 05-12-2015, 06:30 PM
 
Location: Florida
4,437 posts, read 3,780,263 times
Reputation: 4258
Quote:
Originally Posted by saralvr View Post
The money is going to be put back into my mother's name. I was joint on the account and that's how it will be again. The papers are being sent to her and we will sign and send them back and hopefully this will all be taken care of within the month. They said 10 business days after they receive it back signed.
I have no idea if this is re-gifting or any implications but from what I've been told if it's done pronto we should be fine. The broker called me at length this morning and seemed to feel if this is done quickly there will be no penalties. I guess we'll see. Lesson certainly learned.

As for my siblings, they are very well aware of my being on this account. I've been on it for years. There will be absolutely no problems when mom passes. I account for everything I spend on her and keep a log. No one ever wants to even see it. I pay all her bills and document it all. When the time comes things will be divided up equally.

Hopefully this all goes smoothly.
My guess is you will be ok and everything will be as if it never happened. But joint ownership is also bad. Once you get it back to joint you should get it in her name and you can be a check signer but not an owner. In joint names your creditor could get your mothers money. For taxes you may have to prove the money was hers and you would avoid tax problems.
I would not go directly to her name so do not take a short cut.
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