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LegalGems
LegalGems, Attorney
Category: Estate Law
Satisfied Customers: 3299
Experience:  Private Practice; Elder Law Attorney; Estate Planning; Attorney Mentor
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Beneficiary on my aunts will, I have also received two annuities.

Resolved Question:

Beneficiary on my aunt's will, I have also received two annuities. In the will there is a section Item V - Taxes - I direct that all inheritance estate and similar taxes (including interet and penalties), payable by reason of my death, on any property or interest passing under the terms of this Will, be paid from the residue of my estate without apportionment.
Does that mean that the inheritance tax will come out of the estate as well as Federal Income tax or is that my responsibility.
Submitted: 1 year ago.
Category: Estate Law
Expert:  LegalGems replied 1 year ago.

LegalGems :

Hi; My goal is to provide you with great service - if you have any questions during our chat, please ask! I'll do my best to ensure your satisfaction!

LegalGems :

I am sorry to hear of your aunt's passing.

LegalGems :

The provision regarding taxes is quite common in wills. Generally, the residue of the estate is any property that is not specifically bequeathed to a person, and there is a residuary beneficiary. However, when there is a provision such as this, then the taxes would come from the residue of the estate, with any remaining amounts to the residuary beneficiary.

LegalGems :

It is unusual for the attorney to ask for a check for 15% - did he give you a specific amount?

LegalGems :

Here is a breakdown of fees associated with probate; these are generally taken from the estate - http://www.dallascounty.org/department/countyclerk/feesprobate.php

Customer:

It would be based on the amount of the annuity payment that I received and if received within 90 days which would be july 29th it would be 14.5 percent. So I still don't understand, do I need to pay all of the taxes or would the amount come from the total estate. I am not sure what a residuary beneficiary, I guess that means anyone in the will?

LegalGems :

The will would state who the residuary beneficiary is. It sounds as if the will is vague on taxes resulting from the annuity. Generally, the document will specifically state that any taxes owed on any property is to be paid from the residue. Based on the language quoted, it is unclear what your aunt's intent was.Since it states inheritance taxes and similar taxes, the court would likely construe it to be limited to those taxes. However, then it has broader language. Your attorney should ask the court for an interpretation of the will clause to determine whether the estate is responsible for the taxes. However, if you are the sole beneficiary, it would not really make a difference, as any money paid from the estate would end up, in essence, being paid by you - again, if you are the sole beneficiary.

LegalGems :

Also, typically annuities pass outside probate - unless the estate itself was named. If you were named as the beneficiary for the annuity, then that would be why the attorney is asking for the tax money. The will only affects property that is probated.

LegalGems :

Also, this may come in handy regarding attorney fees: http://www.co.travis.tx.us/probate/pdfs/attorneyfees.pdf

Customer:

That is what I needed to know, so the beneficiary is responsible for all taxes federal and inheritance if they are the sole beneficiary.

Customer:

So the attorney can bill the estate for what reason, just obtaining a check to pay the tax?

LegalGems :

Yes; generally it comes from the estate, for property passing via the probate process.

LegalGems :

The attorney can bill the estate for time spent - court hearings, publication/notice to creditors, etc.

Customer:

Also, why is an attorney necessary if the estate isn't that large.

LegalGems :

An attorney is not necessary - but it sounds as if your aunt had one and that s/he is overseeing the process. Are you the executor? The executor is generally the one who decides if they need an attorney to distribute the estate.

Customer:

My aunt did not have one, however, the executor appointed one.

LegalGems :

OK; so that would be within the executor's powers. Usually an executor will hire an attorney, because the executor is personally liable if there is any negligent distribution of the estate property.

Customer:

Also, after the house is sold and the savings and checking accounts are closed, if you receive a life insurance policy or annuity, does that get taken off the property and checking accounts or do you received the 25% of the entire estate as specified.

Customer:

Another question, I was to receive her car, the executor knew that, however, she died before adding it to the will, He is now having the beneficiaries sign off for me to receive it. Will I actually get the car or can he put book value on it and make me buy it or will that come off of the estate.

LegalGems :

The life insurance policy and annuity generally pass outside of probate. So if the will specified you get 25%, that would include all property that is part of the probate estate (i.e. that does not pass by virtue of the document - other examples would be payable on death bank accounts; these go direct to the beneficiary listed on the account).As for the car, since the will didn't specify that you got it, it would go to the residuary beneficiary - unless they consent to give it to you; which is probably why the attorney is getting the heirs to sign off on it.

Customer:

Who is the residuary beneficiary, I don't know what residuary beneficiary means? Is that the executor?

LegalGems :

The residuary beneficiary is listed in the will. The executor should be able to tell you who this person is. It is usually the person that is the closest to the decedent.

Customer:

I listen to Handel every Sunday on the radio, what a hoot, this is by far the best $30 a ever spent.

LegalGems :

Oh that's good to hear! Thank you.

Customer:

There is no residuary listed in the will.

LegalGems :

That is very unusual. So any property not specifically disposed of via the will would go by intestate succession (next of kin), which is why the attorney is having the heirs sign off on the car.

Customer:

How is next of kin determined, she had no children, my mom wasn't in the will and my uncle was executor however, not in the will.

LegalGems :

What state are you in? I read "Taxes" as Texas....sorry!

Customer:

I am in Pennsylvania.

LegalGems :

OK; just a moment please - it varies by state.

LegalGems :

Here is a chart: http://www.alleghenycounty.us/wo/probate/intestate.pdf. Generally, if no children, then to the parents then the siblings.

Customer:

So no parent, no children, therefore, does the attorney act on that behalf or the executor, or the two beneficiaries that receive 25% each.

Customer:

Sorry, sibling meaning her brother or my mother.

Customer:

I was appointed as successor Executrix, I assume that means if my uncle would not be able then I would assume the responsibility.

LegalGems :

The attorney acts on behalf of the executor, but the executor (and thus the attorney) both have fiduciary duties to the beneficiaries - to all the beneficiaries. Sibling would be your aunt's brothers and sisters - they would inherit in equal shares - as to property that is not distributed in the will. And yes, you are correct; as successor Executrix, you would assume the responsibility if your uncle was unable to do so.

Customer:

If there were life insurance policies without beneficiaries does that mean the executor can claim them for himself or is that part of the estate.

LegalGems :

No, that would go as part of the estate. The executor is not in a better position to inherit simply by virtue of his role as executor.

Customer:

Will all this info be available after probate as to who received what.

LegalGems :

Yes; the executor needs to do an accounting and file it with the court and that is part of the public record.

Customer:

WOW you are really good. This has truly helped. Thank you for your patience and knowledge. So would it be better to pay the inheritance tax now or wait until the estate is settled. That would result in 1/2 percent more.

LegalGems :

You are welcome. Glad to help. If you would save money now - the 1/2 percent - then it would be better to pay it now, unless the attorney has stated that the estate will pay it - but that doesn't sound to be the case. The annuity is separate from the estate, so there is no legal reason to wait for the estate to settle.

Customer:

The attorney definitely is not going to pay it, so I will take your advice and can this be done without going thru the attorney and direct to probate.

LegalGems :

Since you are listed on the annuity as the beneficiary, this would not be a part of the probate estate, so there would be no need to use the attorney.

LegalGems :

Did you have any other questions regarding the above? I want to make sure I answered your questions to your satisfaction before going offline for the evening.

Customer:

Why is he asking for the amount of the annuity is that public knowledge.

LegalGems :

No; that would not be public knowledge. However, it is probably in the decedent's papers so he would have access to this information.

Customer:

So he has the info already and I don't need to call him with any amount. I just need to go to probate and give them a check.

LegalGems :

Here are the forms for the inheritance tax: pa.gov/portal/server.pt/document/628145/rev-1501_pdf Generally, if property passes outside probate then the beneficiary pays the inheritance tax. However, it sounds as if the attorney is handling the tax issue - he may have been directed by the decedent to do so. I would contact the attorney and ask if he was instructed to handle the tax issue.

LegalGems :

I have to go offline shortly - I don't mean to rush you, but did you have any other questions?

Customer:

No just thank you so much.

LegalGems :

You are very welcome. Glad to have helped. Enjoy your evening!

LegalGems, Attorney
Category: Estate Law
Satisfied Customers: 3299
Experience: Private Practice; Elder Law Attorney; Estate Planning; Attorney Mentor
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