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Daily Mail
10-07-2025
- Business
- Daily Mail
How to work out and pay inheritance tax: You get just SIX MONTHS to stump up death duties
The daunting task of working out and paying inheritance tax must be done in the immediate and intense period of grief after a death. Although the vast majority of estates aren't liable for inheritance tax, the number of families grappling with it is bound to rise in coming years due to frozen thresholds, high property prices and pending pension changes. Inheritance tax is levied at 40 per cent on estates above a certain size. Estates passing to a surviving spouse or civil partner are exempt, so for many families it is when the second parent dies that they must work out and declare if any tax is due. Even when an estate is not large enough to pay death duties, the deceased person's finances still need to be gone through and often information must be submitted to the taxman anyway. If an estate is complex, or it feels too overwhelming to handle, those responsible for winding it up should find a lawyer qualified in this area to help calculate the IHT and deal with other financial affairs. But if you do get legal help, it is still important to know what your lawyer will be doing on your behalf and the details you will need to provide along the way. Here's our step by step guide to sorting out inheritance tax after a bereavement. 1. How long do you have to pay inheritance tax You get just six months, kicking off from the last day of the month after a loved one's death, to add up their assets, calculate what is owed and hand over any money due to the taxman. If no money is due, you get 12 months leeway to simply fill in the forms to show nothing is owed. But you will need to settle this issue one way or another with HMRC, if you need to get probate to gain control of the deceased person's funds - it won't be granted without the taxman's official sign-off. Bear in mind though that just because you have probate that doesn't mean HMRC is necessarily satisfied. It can still raise an enquiry at a later date or query a valuation. Also, note here the very important point that the IHT bill has to be paid upfront by the executor or administrator when they haven't yet got access to the assets in the estate via probate. Suddenly scraping up this money can be challenging for people who don't have funds ready to hand, even though they will ultimately be paid back out of the deceased's assets. Those who can't afford it do have options which will be explained below. Inheritance tax experts Thanks to the following money and legal experts who assisted with this guide. Heather Rogers, This is Money's tax expert and the founder of Aston Accountancy Shaun Moore, tax and financial planning expert at Quilter Jade Gani, director of the Association of Lifetime Lawyers and chief executive of Circe Law NFU Mutual, the financial advisory firm 2. Do you need to pay inheritance tax You need to be worth £325,000 if you are single, or £650,000 jointly if you are married or in a civil partnership, for your beneficiaries to have to stump up inheritance tax. A further allowance, the residence nil rate band, increases the threshold by £175,000 each - so £350,000 for a married couple - for those who leave their home to direct descendants. This creates a potential maximum joint inheritance tax-free total of £1million. This own home allowance starts being removed once an estate reaches £2million, at a rate of £1 for every £2 above the threshold. It vanishes completely by £2.3million. Chancellor Rachel Reeves said in the autumn Budget these thresholds will be frozen until 2030. She also announced that inheritance tax is going to be levied on unused pension pots starting in spring 2027, as it is now on other assets such as property, savings and investments. This is Money's tax expert and the founder of Aston Accountancy, Heather Rogers, notes that sometimes the full NRB is not passed to a surviving spouse on death, because the first spouse who died did not leave their entire estate to them. She says the full RNRB may also not be available for offset, depending on the value of the property and other factors - for example, there are special rules if you have sold your home to pay care fees. Trusts can also add complexity, adds Rogers. > 10 ways to avoid inheritance tax legally 3. Do you need to fill in IHT forms This can be a minefield. IHT forms sometimes need to be completed to prove an estate doesn't owe any money to the taxman, not just when there is a bill to pay. explains when to send full details of an estate even when no tax is due here. Most estates are 'excepted estates', in which case you do not have to give full details of the value. But take care over this because if you do not submit an IHT400 form when it is required you can face penalties, which are explained below. 'The complexity lies in determining whether the estate qualifies as excepted,' says Shaun Moore, tax and financial planning expert at Quilter. 'If it does, the process is simpler and you can usually proceed with probate without submitting detailed tax forms. If it does not, then full disclosure is required, even if no tax is ultimately payable. 'Fortunately, following a review by the Office of Tax Simplification in 2021 the government announced the reduction in reporting requirements for inheritance tax with an anticipated 90 per cent of non-tax paying estates avoiding mandatory reports. 'However, some still do need to report so checking is crucial.' Moore provides the following examples where form filling can still be required. If the deceased: - Gave away more than £250,000 in the seven years before death - Continued to benefit from gifts they had made - Left an estate worth more than £3million - Held foreign assets worth over £100,000 - Previously lived in the UK but died while living abroad - Had a life insurance policy that paid out to someone other than a spouse or civil partner alongside an annuity - Increased the value of a pension lump sum while terminally ill - Agreed property they had given away would remain part of their estate rather than pay a pre-owned asset charge - Had made gifts into trust or held an interest in a trust worth more than £250,000, or held an interest in more than one trust. - Had put assets in a trust which passed to a surviving spouse, civil partner or charity and was worth £1million or more, or £250,000 or more after deducting the value of the exempt transfer. > How does probate work? Dealing with someone's estate 4. Which forms do you need to fill in and where do you find them The Government has a scarily long list of inheritance tax forms here. However, the ones you are most likely to need are below. You should seek professional help if you struggle to fill them in, or the estate is complicated. 'Understanding which forms to complete is one of the first hurdles for families dealing with inheritance tax,' says Shaun Moore of Quilter. 'It's important to check carefully which ones apply, as they can be detailed and time-consuming.' Inheritance tax forms IHT400 - If inheritance tax is due, or a full account is due - perhaps because you need to claim the Residence Nil Rate Band. There can be extra pages, called 'schedules' depending on what is in the estate. IHT403 gifts and other transfers IHT404 for jointly owned property IHT405 for homes or land IHT406 for bank accounts IHT407 for household items like furniture or jewellery IHT418 for trusts or large lifetime gifts If the date of death was on or before 31 December 2021 IHT205 - If the death occurred before this date but it is unlikely any IHT is due, you might be required to complete this form. As explained above, applying for probate is an important step to gain control over an estate after someone dies, allowing executors to access bank accounts, settle debts and sort out bequests. But you usually need to have paid any inheritance tax owed before probate is granted, unless you are paying the tax in instalments - more on this below. You will need to get an IHT reference number from HMRC at least three weeks before paying any tax. After paying, you will have to wait for HMRC to send you a unique code confirming you've paid it, which allows you to obtain probate. You will usually get this code within 20 working days of HMRC receiving your IHT400 form or inheritance tax payment, whichever is later. Probate forms PA1P - To apply for probate if the person who died left a will PA1A - To apply for probate if there was no will 5. Who is responsible for filling in the forms If there is a will, the executor - there might be just one, or sometimes more - has to take on this task. If there was no will, someone can step up and apply to be the administrator of the estate instead. Whoever does this is usually a close family member and/or someone who will inherit under the intestacy rules. If there is no one, a qualified professional like a lawyer will be appointed, and their fees are paid out of the estate. The executor and administrator are sometime referred to in legal jargon as the 'personal representative'. Heather Rogers of Aston Accountancy says these people are responsible for sorting out the estate and completing inheritance tax forms, but they can delegate this work to a solicitor. Again, the fees are charged to the estate. 'This is recommended for complex estates and in my view absolutely mandatory if you have contentious probate – this is where someone challenges the will,' says Rogers. 'You can get into all sorts of legal issues handing those yourself due to the impartiality requirements.' Other than dealing with inheritance tax, personal representatives have to do everything else involved in winding up an estate, like applying for probate and distributing the assets to the beneficiaries. If you are named in a will as an executor but don't want to do it, you can officially relinquish the job - but only if you have not already started carrying out the duties. 6. What information will you need to gather You need to gain a full and accurate picture of the deceased's finances on the date they died. That means chasing up all bank statements and other accounts of their assets, like investments and pensions, and getting property valuations. This can be slow and tedious work, and you might have to chase some finance firms hard for the information. You can ask for compensation if they let you down - former judge Stephen Gold won hundreds of pounds more for his late aunt's estate from bungling banks and businesses this way. You also need to find out what gifts the deceased made in the last seven years before they died, which can be tricky if this was done haphazardly and no records were kept. Keep documents for everything you find out, because HMRC can and may very well ask questions about the figures. has a guide to how to value an estate for inheritance tax here. 7. What assets do you need to declare to the taxman Everything that is owned, either in the person's sole name or jointly, has to be included on the IHT form. Shaun Moore of Quilter says: 'That includes property, bank accounts, shares, valuable possessions like jewellery or art, and life insurance policies if they weren't written in trust. Gifts made in the seven years before death must also be included.' Heather Rogers of Aston Accountancy says if an asset like a family home is going to pass to a beneficiary and not be sold, it is important to get a surveyor to prepare a proper report on how much the property is worth. 'I speak from personal experience on this, as HMRC enquired into my father's estate due to the value placed on the house,' she says. 'Fortunately, I had the surveyor's report and the District Valuer accepted it, after a visit to the property. HMRC then had to accept it too. 'This is another area where people make errors and skip steps and pay the price when an enquiry is opened.' Rogers also cautions: 'Foreign assets can be left off either intentionally or innocently but they are also usually picked up by HMRC at some point due to the information sharing between countries.' 8. Should you get an accountant to help you Inheritance tax is normally handled by a solicitor if you get one to help you sort out an estate. However there are several important, related tax jobs where an accountant might be needed, and which are often overlooked. 1. A tax return for the deceased for the tax year up to the point of their death. 2. An estate tax return covering the period when the estate is being administered, from death until when it is finalised - if you have a solicitor, they will normally hire an accountant to do this and it is included in their service. 3. A calculation of capital gains tax if a property is later sold for a higher value than was declared at probate (see the link below for a detailed explanation of this little-known tax trap). Regarding the period of administration of the estate, Rogers says: 'A letter to HMRC will suffice if it is a simple estate. 'Any estate paying inheritance tax will most likely have to do these returns. Income tax and possibly CGT will be payable during this period and it ends when the assets are distributed. 'The liabilities are paid from the estate and for any income arising on the beneficiaries a tax credit will be available for that paid by the estate.' Complex estates have to be registered with the Trust Registration Service if any of the following apply: - The estate is worth more than £2.5million - Income tax and/or capital gains tax during period of administration will exceed £10,000 - Assets of more than £500,000 are sold in any one tax year forming part of the period of administration > Do I have to pay CGT because I mistakenly undervalued a house for probate? Getting a valuation: If a family home is going to pass to a beneficiary and not sold, it is important to get a surveyor to prepare a proper report - as HMRC may dispute your figure 9. What if you can't afford to pay inheritance tax upfront Many people worry that a large inheritance will be a burden rather than a boon, when they learn they must hand over potentially gargantuan sums to the taxman before seeing a penny. It is common for beneficiaries to not have the ready cash to pay inheritance tax bills. But you do not have to be rich already to receive a substantial inheritance, and you will not be beggared by the experience. Heather Rogers explains the usual ways around the problem of paying inheritance tax within six months of a death, and before you can access the estate. The Direct Payment Scheme: Use cash in the deceased person's bank accounts, NS&I accounts and sometimes investment portfolios too to pay HMRC direct. Details of the Direct Payment Scheme are here. Pay in instalments: If the estate is tied up in non-cash assets, for example property, shares, or a business, you can spread payments to the taxman in 10 equal instalments over up to 10 years. But on top you will need to pay a variable rate of interest, which is set at the Bank of England base rate plus 4 per cent at the time of each instalment. The base rate is currently 4.25 per cent, so the interest rate is 8.25 per cent right now. You can pay the bill off in full at any time to stop paying the interest. But people often choose to pay by instalments so they can afford to keep the family home, or if it is taking a very long time to sell the property. Borrow to cover the bill: Take out a commercial bridging loan using assets in the estate as collateral. Or, apply for a Grant on Credit from HMRC to postpone paying IHT until the assets are sold. Interest is charged in either case. Take out insurance: If the deceased has planned in advance, they can take out life insurance and put it in trust, so it isn't in the estate for IHT purposes. You can appoint one or more beneficiaries of the trust, who will be paid the full sum due when you die. And you can insure your life for the sum you think your beneficiaries will have to fork out in inheritance tax, to offset their liability. However, premiums can be high, especially as you get older, and if you cancel a policy you immediately lose all the benefits of taking it out in the first place. Divert some of the estate to charity: IHT is reduced from 40 per cent to 36 per cent if at least 10 per cent of an estate was left to charity. If it wasn't, beneficiaries of a will can still redirect some of their inheritance to charity via a 'deed of variation' to cut their IHT bill. > How to avoid IHT on life insurance by putting it in trust > How does a deed of variation work 10. What if you miss deadline for paying IHT or submitting forms If you are the personal representative - the executor or administrator of an estate - you have six months from the end of the month after the date of death to pay an inheritance tax bill. For example, if someone died on 15 January, IHT is due by 31 July. If you are late, you will be charged interest on the unpaid tax - it is currently 8.25 per cent a year. This interest rate applies even if you've arranged to pay in instalments. Meanwhile, you have 12 months to submit IHT forms. You might want to take this extra time if no IHT is owed, but you do need to apply for probate to get access to an estate, and have to get HMRC's sign-off to do so. There are penalties for late filing of the IHT400 form, separate from interest and based on how late it is submitted. - Up to 6 months late: £100 -Six to 12 months late: Additional penalty of £200 - More than 12 months late: Up to £3,200 These penalties are subject to appeal if you have a reasonable excuse. 11. What about other penalties for making errors, missing off assets or evasion 'A favourite enquiry area for HMRC is estates, particularly property valuations,' warns Heather Rogers of Aston Accountancy. 'If you get the wrong valuation, or HMRC disagrees with your valuation, then expect a visit from the District Valuer.' She says if an asset is being sold it is less of a worry as the amount it fetches will be the value for the final inheritance tax account. But if an asset like a property is going to be passed to a beneficiary, you should get a valuation by a surveyor. Rogers says the level of penalty you might face depends on the circumstances, but can be severe. Here is a rundown. - Reasonable care has been taken - Up to 30 per cent of the IHT bill, but this let-out will not apply if a professional valuation hasn't been obtained for a property or other valuable assets. - Assets have been deliberately omitted from an IHT return – up to 70 per cent of the bill. - Hiding a deliberate error – up to 100 per cent of the bill. You might also face contempt of court for signing a misleading legal statement. How HMRC combats tax evasion and what penalties you face > What to do in a dispute with the taxman Jade Gani: If your submitted values were inaccurate, a corrective account can be filed later 12. What if asset values change - can you make amendments You should be prepared to submit at least one 'corrective account', says Rogers. She explains this is because IHT has to be paid before the grant of probate is issued, so assets will probably be sold for a different amount later. 'If the asset is land or property and is sold at a loss then the claim for a repayment of IHT must be made within four years of death. For shares it is one year.' You need the form IHT38 for losses on land and buildings and IHT35 for losses on shares. Jade Gani, director of the Association of Lifetime Lawyers, says: 'Asset values can fluctuate. HMRC assesses IHT based on values at the date of death. 'If your submitted values were inaccurate, a corrective account can be filed later but must be done before finalising the estate.' Gani adds that common errors people make with inheritance tax include failing to correctly value joint assets, undervaluing assets in general, and ignoring gifts made in the seven years before death.
Daily Mail
10-07-2025
- Business
- Daily Mail
Can we put our children on our properties' deeds to avoid inheritance tax?
We are a retired couple and have two adult children, aged 45 and 30. Our home is worth around £350,000 and we also have a buy-to-let property valued at £250,000. Both are owned in our joint names as tenants in common. We also have investments worth £150,000. We wish to pass on the two properties to our children, giving them one each. We intend to do this by adding their name to each respective title deed as joint owners with us. When we both pass on, will our children be subjected to inheritance tax? U.P Harvey Dorset of This is Money replies: An increasing number of people are being dragged into paying inheritance tax as the allowance remains frozen and house prices gradually rise. Now, with pensions set to be included in IHT calculations from 2027, this will pull even more estates into the net. At the moment, your estate is not of the size that will make it liable for an inheritance tax charge - provided you are able to use your full allowances and also spousal transfer. This would mean you and your husband could, collectively, transfer up to £1million to your children tax-free. As discussed below, however, upcoming changes could affect this depending on the size of your pensions - and if they take you over that £1million mark. In your case, with an estate worth £750,000, your pensions would have to be worth more than £250,000 combined for this to happen. But avoiding this also isn't as simple as you placing your children's names on the title deeds of your properties. In fact, your situation could prove problematic further down the line if you don't handle it properly. To find out what you need to do to ensure your children aren't stung with inheritance tax, This is Money spoke to a financial adviser and solicitor, who share their responses below. Tom Garsed-Bennet, independent financial adviser at Flying Colours, replies: This is a common concern for our clients. Assuming you have no other assets, there is no IHT liability as your estate is valued at under £1million. However, if you have defined contribution or personal pensions, these will become part of your estate from 6 April 2027 and could tip it into IHT territory. As it stands, there appears to be no IHT benefit in adding your children's names to the property titles. It could even be a hinderance for tax planning if they were. This is because adding children to their parents' main residence property deed could trigger a 'gift with reservation of benefit' situation. In this case, His Majesty's Revenue and Customs could still treat the 'gift' - in this case a share of your home - as part of your estate, as you were still using it at no cost. The child who received a share of your main home would also be liable for capital gains tax on any gain in value on their share, as it would effectively be a second home. If you and your husband to retain your main residence in your names only, it would not be subject to CGT. The child that was put on the deeds of the buy-to-let property would be entitled to a proportion of the rental income as part-owner. They would also be subject to capital gains tax once the property was sold. If there is any concern around residential care fees eating into your estate in future, then a property protection trust might be a good option for you. This allows the 50 per cent share of the property to move into a trust on first death (of either yourself or your spouse). The remaining spouse can continue living in the property or move house (as they have a lifetime interest), but they only own 50 per cent themselves. This is normally written into your will and only becomes effective on the first death. This approach means that should the remaining spouse need residential care in future, only their half of the house can be accessed to pay for their care. The other half of the house is ring-fenced within a trust for the beneficiaries - your children in this case. I would always advise you to seek independent professional advice to guide you through this process, however, as IHT is a notoriously complex area. Help with financial advice and planning Financial planning can help you grow your wealth, sort your pension, or make sure your finances are as tax efficient as possible. A key driver for many people is investing for or in retirement and inheritance tax planning. If you are looking for help sorting your finances and want to work out whether you need advice, planning, or coaching, the following links can help you understand more: >Do you need financial planning or financial advice - and is it worth it? > Financial advice: What to ask and how much it might cost > Are you retirement ready? Take our quiz and get financial planning help > Inheritance tax planning - what you need to know to protect your wealth Joshua Ryan, principal associate at Weightmans LLP, replies: With tax and estate planning, the starting point is to take a step back to assess your assets holistically. This tends to lead to more planning options. The combined value of your estates is £750,000. Each individual has an inheritance tax-free allowance, which is known as the nil rate band. This allowance is currently set at £325,000, but is reduced by gifts made in the seven years prior to your death. Equally, if you leave residential property to a child or grandchild, and the value of your estate is beneath £2million, you can claim an additional allowance called the residence nil rate band allowance, which is valued at £175,000. The total value of both allowances is £500,000 per person, or £1million for a couple. Circling back, it would seem as though the value of your estates is within your available allowances and so you are not presently exposed to inheritance tax. Aside from preparing a tax-efficient will to ensure that the above allowances are retained in full, the best planning strategy would be to do nothing, for now, and to keep an eye on the value of your estates. With this being said, if the value of your estate exceeds the available inheritance tax-free threshold, you might want to take steps to reduce the size of your estate to reduce the inheritance tax payable on your deaths. This should be guided by professional tax and legal advice. There are many anti-avoidance rules and requirements that need to be carried out, and failure to follow these rules not only leads to unnecessary costs but also in many cases significantly increases the tax liability payable on your death. Key points to note when dealing with properties are as follows: 1. The UK has a principle that you cannot retain a benefit from an item gifted – this is known as the gift with reservation of benefit rule, and it means if you give something away you cannot continue to benefit from it. Therefore, simply adding your children's name to the title deeds will not work – you have not given the asset away, and so you will be liable to inheritance tax on the property. 2. Equally, certain allowances such as the residence nil rate band allowance rely on you owning your home or the proceeds of your home on death. If you gift your home then you do not own it – this reduces your available allowances, and I have seen many a case where inheritance tax is due as a result of the lost allowances. 3. There are steps that you can take to gift a share of the property to your children – but this planning is not straightforward, and needs careful consideration. There is more than one way to do this too: you can gift and rent back, you can gift a part of the property, or you can move your children in with you and gift. Each one has strict requirements so you need to ensure you abide by these, and to take professional tax and legal advice. 4. Finally, when gifting properties that are not your home then you risk generating a capital gains tax liability. The current capital gains tax rate is 24 per cent on the gain made. Equally, if you gift the property and do not reserve a benefit from it, then the value of the gift is classified as a potentially exempt transfer. You need to survive the date of the gift by seven years to avoid the value being amalgamated with the value of your estate on death. The worst case scenario is that you pay 24 per cent capital gains tax on the gain made by the property, and then 40 per cent inheritance tax on the value of the gift. In summary, there are options but these should be guided by professional tax and legal advice from a solicitor that advises on inheritance tax mitigation.
Yahoo
21-06-2025
- Business
- Yahoo
My sister and her husband died within days of each other. Their banks won't let me access their safe-deposit boxes. What now?
My sister and her husband passed away within a year of each other. I'm blessed that they had the foresight to have a will and living trust that, as the successor trustee, has made dispensing the trust assets much easier. My sister had a business safe-deposit box at her bank. The safe-deposit box is not listed as personal property and is not part of the trust. However, I could access two other safe-deposit boxes in my sister's name with her death certificate. The bank denied me access to her business box, saying it was not part of the trust and was opened in the name of her now-defunct business. The bank suggested filing a claim for unclaimed property in the state where I reside. Israel-Iran clash delivers a fresh shock to investors. History suggests this is the move to make. Why the biggest-ever 'triple witching' options expiration could deliver a jolt to Friday's trading 'I'm at my wit's end': My niece paid off her husband's credit card but fell behind on her taxes. How can I help her? 'I prepaid our mom's rent for a year': My sister is a millionaire and never helps our mother. How do I cut her out of her will? Why the stock market will be performing a high-wire act over the summer, according to UBS My brother-in-law also had a checking account for his medical corporation. The bank said I would be unable to access the funds with his death certificate and trust documents. The bank's advice was the same as for my sister's business safe-deposit box: File a claim with the state for abandoned property. Our trust attorney said the cost of attempting to access the medical-business checking account ($11,000) might not be worth it. My concern is that my sister may have placed three generations of wedding rings, and other family heirlooms in the safe-deposit box. Would I need to file an action in probate court to access the business safe-deposit box and business checking account or wait? Californian Sister Related: My mother is giving away my late grandmother's jewelry. Is it OK to accept a piece from her collection — and then sell it? There are three complications to your dilemma. First, access to these safe-deposit boxes may be complicated by the differing rules of each individual bank, and the fact that they may be in the name of the corporation rather than the individual. But if they are the sole owner of the box, the administrator or executor of your sister and brother-in-law's estate would be able to access them with the right paperwork. Second, if your sister died before your brother-in-law, his heirs will inherit his assets. Hire a trust and estate lawyer who has experience in this field. You are taking advice from an attorney who has told you they do not have expertise in this area. So if this is a treasure hunt, you're already knowingly walking in the wrong direction. My answer is predicated on the assumption that your brother-in-law died first, but two deaths and two probate cases within a year complicate the process and may draw it out for many more months. If you don't have a key to your sister's safe-deposit box, and you are not the public administrator, you will have to obtain letters from the probate court to access the box, per the advice you received. (Although $11,000 sounds like a high fee.) If you did have a key to the box, and you were the executor/administrator, you could access the safe-deposit box free of charge without any of the above documentation. That, however, is not the case here. Nor do you have the right to access the box or claim the contents even if it contains family heirlooms 'Safe-deposit boxes often have restricted access after the owner's death,' according to the AARP. 'When the person passes away, the box is typically sealed until the probate process begins. That can result in family members not having immediate access to important documents like wills, durable power of attorney, insurance policies or medical directives.' The bank is doing its due diligence by refusing you access, and ensuring that the contents of the box are not delivered to the wrong person; once the contents have been accessed, it will be almost impossible to retrieve them. 'When a consumer rents a safe-deposit box from a financial institution, the rental agreement between the parties controls the relationship,' says the R. Silverman Group, which is based in Walnut Creek, Calif. 'California law provides that on the death of the box owner, the institution at which the box is located may deliver the contents to certain defined people (including, but not limited to, a 'relative) if a) the institution has no reason to believe there is a dispute over the contents, b) the person to whom the contents are delivered provides reasonable proof of identity, and c) reasonable records are kept in accordance with related rules,' the law firm says. Including a box in a revocable living trust would have helped avoid these problems. 'If your living trust is the box owner, your named successor trustee will only have access to and control over the box when necessary and authorized by you,' R. Silverman adds. 'The successor trustee has a fiduciary duty to preserve, protect and distribute your property in accordance with your wishes, as set forth in the trust.' But that was not the case with these boxes. The Federal Deposit Insurance Corp. advises consumers not to confuse safe-deposit boxes with deposit accounts. The former is a storage space provided by the bank, 'so the contents, including cash, checks or other valuables, are not insured by FDIC deposit insurance if damaged or stolen,' the FDIC says. 'Also, financial institutions generally do not insure the contents of safe-deposit boxes.' Plus, they can be difficult to access if the owner dies. Safe-deposit boxes are best used to store important documents rather than items like your grandmother's diamond ring — and you should put cash in a checking or savings account where up to $250,000 per account is covered by FDIC insurance. Good candidates for a box 'include originals of key documents, such as birth certificates, property deeds, car titles and U.S. savings bonds that haven't been converted into electronic securities,' the FDIC says. This problem should be solved by the executor of the estate. Related: 'This woman destroyed my heart and soul': After my wife died, her mother turned on me — and presented me with a secret will Previous columns by Quentin Fottrell: 'They hate our generation': My son and daughter-in-law want us to sell our house — and move to Oregon to start a commune I'm 63 and planning to retire. I watched in horror as the markets tanked. Will I have enough to get me to my 90s? I'm carpooling with a friend for a conference. His expenses are covered. Should I offer to pay him for gas? I'm 75 and have a reverse mortgage. Should I pay it off with my $200K savings — and live off Social Security instead? I'm 51, earn $129K and have $165K in my 401(k). Can I afford to retire when my husband, 59, draws Social Security at 62? Tech companies lead list of double-digit gains in June for stocks in the S&P 500 Israel-Iran conflict poses three challenges for stocks that could slam market by up to 20%, warns RBC My mother-in-law thought the world's richest man needed Apple gift cards. How on Earth could she fall for this scam?
Yahoo
19-06-2025
- Business
- Yahoo
What Average Homeowners Can Learn About Family Trusts by Following Jimmy Buffett's $274 Million Estate Battle
The ongoing litigation surrounding Jimmy Buffett's $275 million estate is underscoring how, even with a carefully established will and trust, issues can still arise. CNBC reported that Buffett's widow, Jane, recently filed a petition 'to remove her co-trustee, Richard Mozenter, from the marital trust created to support her after the singer's death in 2023.' Jane Buffett is alleging that the co-trustee is 'mismanaging the trust and not acting in her best interests, including allegedly withholding financial information from the family,' according to the New York Post. Meanwhile, Mozenter also filed a lawsuit against Buffett's widow, alleging she had been 'completely uncooperative,' according to CNBC. While not everyone has Buffett's fortune, this legal battle matters to everyday homeowners. In a recent report, Cerulli Associates found that the so-called 'Great Wealth Transfer' will amount to an astonishing $105 trillion being transferred to heirs by 2048; and with trillions in assets set to transfer from boomers to their heirs in the coming decades, these high-profile cases offer essential lessons in estate planning, family communication, and legal clarity. 'The legal battle over Jimmy Buffett's estate is a master class in why estate planning is as much about managing family dynamics as it is about managing assets,' says Jake Howell, a California estate planning attorney and founder of Howell Estate Planning. He adds that while the $275 million figure is staggering, the underlying issues are universal. 'For the average American family, whose primary asset is their home, the lessons are arguably even more critical because there is far less room for error. A dispute can easily consume a family's entire inheritance,' Howell adds. Monique D. Hayes, partner with DGIM Law, echoes the sentiment, noting that for many Americans, the bulk of their wealth is represented by equity in their primary residence (homestead). 'To the extent families intend to transfer that wealth to the next generation, it's important to do so in a way that minimizes taxes, the need for probate, and internal disputes,' she says. 'High-profile cases often highlight the consequences of the failure to plan and implement a strategy to preserve wealth.' Buffett's estate battle reportedly centers on the fact that the two co-trustees are not seeing eye to eye and are petitioning to have each other removed as co-trustees. CNBC reported that Buffett's will directs 'his assets be placed in a marital trust for Jane.' Their three children are 'so-called remainder beneficiaries of the marital trust, which means they will receive any remaining assets left after Jane's death.' The late singer also appointed a co-trustee, Mozenter, who was his accountant. Now, Mrs. Buffett's complaint alleges that the majority of her net worth is 'controlled by someone she does not trust, and to whom the trust for her benefit must pay enormous fees—more than $1.7 million in 2024 to him and his firm—no matter how badly he treats her,' according to the petition. Meanwhile, Mozenter alleges in his lawsuit that he was a 'trusted financial adviser' to Buffett for several decades, and that the singer had 'expressed concerns about his wife's ability to manage and control his assets after his death,' per The New York Times. Steve Sexton, CEO of Sexton Advisory Group, notes that this case highlights the importance of clear communication in family trusts, regardless of an estate's size. 'Despite planning and having the right estate planning structures in place, it seems Buffett's wife, Jane Buffett, and Richard Mozenter, co-trustee of the estate, did not see eye to eye on details of the trust, leading to bad blood and a lengthy litigation process between the two,' says Sexton. He notes that while we don't know whether Buffett attempted to mitigate these issues before his passing, the key takeaway is that it's essential to communicate the details of your trust to your loved ones and ensure they're aware of any co-trustees and their roles in advance. 'Failing to execute on this critical step can result in drawn-out arguments, litigation, and unforeseen expenses years after you pass,' he says, adding that the case also highlights the importance of choosing the right trustee. Despite the legal battle, Buffett did several things right when planning his trust. Ana Mineva, co-founder of DGLegacy, an AI-driven digital legacy planning and inheritance app, explains that when one of the partners is not financially proficient, the high earner typically sets up a trust or family trust to protect their assets and loved ones. She adds that Buffett did exactly what he should have done: He made an estate plan, he used a family trust to shield assets from probate, and he named trustees to ensure long-term management. 'These are solid, basic steps that everyone—regardless of wealth—should consider. A family trust can be incredibly effective, especially for homeowners, if the assets are properly titled, trustees are selected wisely, and beneficiaries understand the setup,' Mineva says. And, as Sexton notes, most people think all they need to ensure a smooth transfer of wealth is a will but do not realize that their estate will still go through the probate process without a trust. He says Buffett also likely had his family's privacy top of mind; since wills can become public record during the probate process, trusts can offer more privacy and flexibility overall. Despite having taken these steps, Buffett's estate planning still went wrong. The widow lacked transparency and awareness about the assets under the family trust, which raised questions and uncertainty, says Mineva. As for the other co-trustee, he appears to have refused to share key financial information about the grantor's estate and has not collaborated efficiently with the beneficiary and co-trustee. 'This led to litigation and emotional strain for the family,' Mineva adds. 'Unfortunately, this appears to be common—even when perfectly drafted legal documents are in place.' Fortunately, steps can be taken to avoid these issues, she says: Selecting trustees who are competent, empathetic, and trusted by the beneficiaries Avoiding co-trustee deadlocks by defining clear roles or adding neutral tie-breakers Implementing digital legacy planning and inheritance solutions that ensure beneficiaries are informed about the assets in the family trust without requiring difficult, emotional conversations during life Maintaining a regularly updated inventory of assets, accessible at the right time 'The high level of trust placed in the trustee—and limited confidence in the surviving partner's financial literacy—may have laid the foundation for challenges in managing the trust,' Mineva says. Fortunately, there are several ways for people to anticipate these issues and avoid litigation. As Howell explains, the twin pillars of a successful plan are clarity and transparency, and when a well-funded estate plan ends up in litigation, it's almost always due to a failure in two key areas: clarity in the legal document and transparency with the family. 'The Buffett case appears to be a textbook example of this breakdown,' he says. This, as Howell puts it, is the 'legal pillar.' Clarity is about the precision of the trust document itself: It must be an unambiguous instruction manual for your trustee. When it's not, disputes are inevitable, he says. In addition, he notes that a primary source of conflict is the tension between an income beneficiary (often a surviving spouse who receives income like dividends or rent) and remainder beneficiaries (often children who inherit the core assets later). 'Their interests are diametrically opposed. Maximizing income for one can mean depleting the growth of the inheritance for the other. Without crystal-clear instructions from the trust's creator, the trustee is caught in a family tug-of-war,' he says. Finally, be aware of vague language. Phrases like 'distribute assets fairly' or 'provide for my spouse's comfort' are invitations for a lawsuit, Howell says. 'Each beneficiary will interpret that language to their own advantage. The plan must be radically specific about who gets what, when, and how,' he adds. This is the 'human pillar,' and it's about communication, according to Howell. For instance, a legally perfect document is useless if it's a secret that explodes on a grieving family—when heirs are unaware of the plan's contents, the reading of the trust can feel like a shocking verdict. 'This is often where good intentions fail, because good planning requires having difficult conversations we'd rather avoid,' Howell says. The solution is a family meeting: You don't need to share every financial detail, but you must explain the what and the why of your decisions, he adds. Another critical mistake is the 'co-trustee trap.' While this may seem 'fair' in your own life, especially to avoid choosing between children, it is one of the most common and disastrous mistakes in estate planning, Howell says. 'Co-trustees must typically act unanimously,' he explains. 'If they disagree on a decision—whether to sell the family home, how to invest funds, or how much to distribute—the entire estate is paralyzed.' He recommends appointing a single, trustworthy, and capable trustee. Then, name at least one or two successors in case your first choice cannot serve. And for any situation with complex assets or tense family dynamics, a neutral professional trustee is the safest and often wisest choice, he adds. Finally, Howell says that a family trust is not merely a financial instrument; it is the final message you leave your loved ones. The battle over Buffett's estate teaches us that for this message to be received, it must be clear in its content and transparent in its delivery. 'We have all learned in our lives that avoiding a difficult conversation today only creates a bigger problem tomorrow. Estate planning is no different,' he says. 'The ultimate lesson here is that embracing that conversation—no matter how uncomfortable—is the only way to ensure your legacy is one of peace, not one of painful, protracted conflict.' New Homes Are Flying Off the Shelves in These 4 Metros—Defying the National Trend of Sluggish Sales Mapped: States Most at Risk for Hurricane Damage 7 Bedrooms Is the New 4 for Luxury Living in New England Suburbs
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07-06-2025
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I'm an Estate Planner: 6 Things Every Retiree Should Have Prepared in 2025
Retirement is a major milestone, but it doesn't mean the planning stops. In fact, estate planners said 2025 is the perfect time to make sure your legal and financial documents are up-to-date. Read More: Find Out: From wills and power of attorney forms to digital account access and final wishes, these are the six things every retiree should have prepared in 2025. To avoid family disputes and ensure their wishes are honored, retirees should have five essential estate planning documents in place: a last will, a durable power of attorney, an advance healthcare directive, a HIPAA release form, and, if significant assets or property are involved, a revocable living trust. 'These legal documents are designed to minimize family conflict, avoid probate, and give you the power to make medical and financial decisions, should you become incapacitated,' said Seann Malloy, founder and managing partner at Malloy Law Offices. 'The U.S. Constitution protects due process as well as property rights, but your wishes may not be carried out without these documents.' Discover Next: Every retiree should have legal documents in place that authorize someone they trust to make medical and financial decisions if they're ever unable to do so themselves. Having powers of attorney prepared in advance ensures their wishes are respected during an emergency. 'Even if retirees aren't dealing with any medical issues or concerns presently, there is always a chance that something could happen suddenly that leaves them unable to make decisions for themselves,' said Ben Michael, attorney at Michael & Associates. 'Having these documents prepared ensure that in the case that something does happen, the people they want to make decisions for them will have that legal right.' A comprehensive estate plan should include a strategy for long-term care. This may involve purchasing long-term care insurance or establishing an asset protection trust, such as a Living Trust Plus or a Medicaid asset protection trust. 'The best estate plan becomes useless when someone is forced to go broke to pay for nursing home care or other long-term care and winds up with no estate to pass on,' said Evan Farr, principal attorney at Farr Law Firm PC. Farr said retirees can strengthen their estate plan this month by making sure it includes a long-term care strategy. This may involve purchasing long-term care insurance or establishing an asset protection trust, such as a Living Trust Plus. Every retiree should review and update the beneficiaries listed on their retirement accounts, life insurance policies, and bank accounts. These designations take legal precedence over a will, so failing to revise them after major life changes, such as a divorce, death, or new grandchild, can lead to assets being distributed in ways that don't reflect the retiree's true wishes. 'Finally, overlooking contingent (secondary) beneficiaries can leave accounts exposed to probate if the primary beneficiary has already died,' said Steve Lockshin, founder and financial advisor at Vanilla, the modern estate planning platform. As more aspects of our lives move online, experts said using a digital estate planning platform can simplify everything from document storage to updates and access. 'These tools not only help organize all your important documents and assets in one secure place, but they can also send reminders when something needs updating, like a beneficiary or legal form,' said Howard Enders, COO of The Estate Registry, a fintech platform for digital estate and asset management. Enders added, 'Most importantly, they make it easier for your loved ones to access what they need, when they need it, without digging through file cabinets or chasing paperwork.' In 2025, every retiree should have a centralized way to store and protect their digital passwords. A password manager, paired with a secure plan for sharing the master key, can prevent major headaches for the executor and heirs. 'A password manager keeps everything in one secure place, which can make a world of difference later on,' said Jennifer Zegel, an estate planning attorney and chief product officer at Eternal Me. Zegel explained, 'If you want to go one step further, store the master password to your password manager in a secure platform that uses distributed cold storage. This is the most secure way to store this information and ensures your executor and only your executor can access it when it's needed most.' More From GOBankingRates 5 Types of Cars Retirees Should Stay Away From Buying This article originally appeared on I'm an Estate Planner: 6 Things Every Retiree Should Have Prepared in 2025
