[Spouse recently passed away. Please help me handle his financial matters]

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills.
water2357
Posts: 654
Joined: Sat Sep 12, 2020 9:24 am

Re: [Spouse recently passed away. Please help me handle his financial matters]

Post by water2357 »

You mention a ROTH IRA as "helping" with taxes. ROTH IRA contributions that you make out of your earned income are not tax deductible, so a contribution won't directly reduce your taxable income, like a contribution to a traditional IRA. However, the investment income earned on monies in a ROTH are generally not taxable in the future when you withdraw them. Remember that generally, you must leave money in a ROTH for 5 years to obtain any tax advantage and to avoid penalties. There are rules about withdrawing monies from ROTH IRAs, so you will need to become familiar with those rules. And there are rules on how much you can contribute based on your income and tax filing status.

General IRS information on IRAs (ROTH or traditional)
https://www.irs.gov/retirement-plans/in ... ments-iras

IRS publication 590-A tells you all the rules on making contributions to IRAs (ROTH or traditional)
https://www.irs.gov/forms-pubs/about-publication-590-a

IRS publication 590-B tells you all the rules on taking withdrawals from IRAs (ROTH or traditional)
https://www.irs.gov/forms-pubs/about-publication-590-b

There may be advantages to opening an IRA for 2020 dependent on your tax filing status in 2020 vs 2021 vs 2022, etc. I believe someone else may have mentioned that earlier in this discussion.

As far as how/where you open an IRA, depending on where you choose, e.g. Fidelity, Vanguard, a bank, a credit union, etc. you will need to ask them some questions up front as to their fees to open the account, transfer money out of the account, close it, maintain the account, etc. These fees vary for each particular financial institution. You will also need to ask them how quickly they can set it up and have your contribution transferred in, so that you meet the May 17, 2021 deadline. And if you want the contribution to be credited to 2020, you need to tell them that. You also need to look at what investment options are available wherever you open the IRA so that you earn a return on your money that you are happy with. And you need to consider if you want your money to also be federally insured (FDIC, through NCUA, etc.) which would work through a particular bank or credit union or if you are ok with other types of investments (which would work best with a brokerage account). Remember that all your IRAs (ROTH and traditional) at one financial institution are added together for federal insurance purposes.

If you choose a financial institution where you are already known or have accounts that you are happy with, the set up may go faster/easier. You can always direct transfer your monies out later to another financial institution (generally if they are liquid and in some other cases) dependent on the institution's rules and fees if any.

For example, depending on where you already have accounts, it may be simple to set up a ROTH IRA with Fidelity or just as easy to set up a ROTH IRA with a credit union you like if you just want to put the money in a CD for now.

Choose who you are most comfortable working with and that will give you investment options that you are comfortable with for the next year or so.

Others may have more suggestions or the various wikis suggested already by others may help.

Good Luck!
User avatar
LadyGeek
Site Admin
Posts: 95466
Joined: Sat Dec 20, 2008 4:34 pm
Location: Philadelphia
Contact:

Re: [Spouse recently passed away. Please help me handle his financial matters]

Post by LadyGeek »

Bennie - Do you have enough copies of the death certificate?

If you visit a place in-person (like a bank or Social Security), they'll want to see the original. Hopefully, they'll then make a copy and give the original back to you.

Alternatively, online submissions (like Vanguard) will accept a scanned copy. Why? Remember that they already know he's passed away - thanks to Social Security telling them.

If you need extra copies, ask the funeral home. They're not cheap and the rates are set by the state. In PA, it's $20 a copy.

If your deceased husband was a vet, he's entitled to free copies from the Veterans Administration. Ask the funeral home about that.

Technically, what you get is an official copy of the death certificate. The original is held by the state.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.
rlchambers
Posts: 30
Joined: Sun Jan 24, 2021 2:10 pm

Re: [Spouse recently passed away. Please help me handle his financial matters]

Post by rlchambers »

SuzBanyan wrote: Mon Apr 12, 2021 8:32 am
basspond wrote: Mon Apr 12, 2021 7:57 am My condolences. Take some time before making any huge financial decisions. There is one form the IRS requires to be filled out within 9 months, that is form 706. This allows you to transfer your spouse’s portion of their inheritance exemption to you. Even though the individual exempt amount is $11.5M now, that can be changed at anytime.
If the only reason for filing Form 706 — Estate Tax return is to protect the spouse’s portion of the exemption, the deadline to file the 706 is 2 years from the date of death. Under Section 4.01(1) of Rev. Proc. 2017-34, any executor will automatically have until the second anniversary of the decedent’s date of death to file an estate tax return for the purposes of claiming portability. Given the general information given about the assets of the OP and her deceased husband, it is likely that no estate tax return is required for her husband’s estate, except to elect portability.
Are you saying regardless of the size of the estate that Form 706 has to be completed?
MakesCents
Posts: 15
Joined: Wed Apr 14, 2021 2:51 pm

Re: [Spouse recently passed away. Please help me handle his financial matters]

Post by MakesCents »

bennie,

So sorry for your loss.
Just FYI, 3 years ago my spouse passed away before I filed my taxes for the year.
I had already had the taxes completed in TTax, just not efiled.
When I got to it, I efiled and it got rejected. I ended up having to mail it in.
What I should have done, is to have gone back into TTax into the personal info and checked off that he had passed.
That generated print 'First Name Last Name Deceased' on the top of the 1040 - the IRS was aware that he had passed and rejected my efiled return because of it.

Your state probate laws may be different but I did have to go through probate (they were very helpful in the office) in order to remove my spouses name from the joint survivorship house deed. I was explained that without me doing that, if I wanted to sell, there would be issues at the closing as far as a clean deed. I had to file the probate paperwork listing that there were no outstanding claims and that the deed could be conveyed to my name only - I had to file it with the town for the deed records to be correct.

I also have interest in this Form 706 - which I did not know needed to be filled out. I'm past the window of submitting it but will be following this thread to see if anyone can give more information on what kind of issues may be created if you don't do the form.
Best of luck,
MakesCents
SuzBanyan
Posts: 2008
Joined: Thu Jun 02, 2016 11:20 am

Re: [Spouse recently passed away. Please help me handle his financial matters]

Post by SuzBanyan »

rlchambers wrote: Wed Apr 14, 2021 12:35 pm
SuzBanyan wrote: Mon Apr 12, 2021 8:32 am
basspond wrote: Mon Apr 12, 2021 7:57 am My condolences. Take some time before making any huge financial decisions. There is one form the IRS requires to be filled out within 9 months, that is form 706. This allows you to transfer your spouse’s portion of their inheritance exemption to you. Even though the individual exempt amount is $11.5M now, that can be changed at anytime.
If the only reason for filing Form 706 — Estate Tax return is to protect the spouse’s portion of the exemption, the deadline to file the 706 is 2 years from the date of death. Under Section 4.01(1) of Rev. Proc. 2017-34, any executor will automatically have until the second anniversary of the decedent’s date of death to file an estate tax return for the purposes of claiming portability. Given the general information given about the assets of the OP and her deceased husband, it is likely that no estate tax return is required for her husband’s estate, except to elect portability.
Are you saying regardless of the size of the estate that Form 706 has to be completed?
Not an expert but I believe that on the death of the first spouse, the surviving spouse must file a 706 IF they want to take advantage of the deceased spouses’s lifetime exemption when the surviving spouse passes. Here’s an example from 2017 from thetaxbook.com :

“A decedent is allowed an exclusion amount against the Federal Estate and Gift tax. For decedent’s dying in 2017, the inflation adjusted exclusion amount is $5,490,000. This means that for decedent’s dying in 2017, lifetime gifts plus the value of assets included in the gross estate up to $5,490,000 are excluded from the Federal Estate tax. For purposes of the Federal Estate and Gift tax, a portability election allows a surviving spouse to add the decedent’s unused estate and gift tax exclusion amount to the surviving spouse’s own exclusion amount. For example, if a decedent dies in 2017 with total lifetime gifts and a gross estate of $3 million, the surviving spouse can elect to add $2,490,000 ($5,490,000 minus $3,000,000) to his or her own exclusion amount.” https://www.thetaxbook.com/updates/TheT ... Method.pdf

With the exclusion amount in 2020 set at $11,580,000, you can appreciate why the surviving spouse of someone who died in 2020 might find it better to be safe than sorry and file the 706 and make the portability election.
User avatar
LadyGeek
Site Admin
Posts: 95466
Joined: Sat Dec 20, 2008 4:34 pm
Location: Philadelphia
Contact:

Re: [Spouse recently passed away. Please help me handle his financial matters]

Post by LadyGeek »

MakesCents wrote: Wed Apr 14, 2021 3:09 pm bennie,

So sorry for your loss.
Just FYI, 3 years ago my spouse passed away before I filed my taxes for the year.
I had already had the taxes completed in TTax, just not efiled.
When I got to it, I efiled and it got rejected. I ended up having to mail it in.
What I should have done, is to have gone back into TTax into the personal info and checked off that he had passed.
That generated print 'First Name Last Name Deceased' on the top of the 1040 - the IRS was aware that he had passed and rejected my efiled return because of it.

Your state probate laws may be different but I did have to go through probate (they were very helpful in the office) in order to remove my spouses name from the joint survivorship house deed. I was explained that without me doing that, if I wanted to sell, there would be issues at the closing as far as a clean deed. I had to file the probate paperwork listing that there were no outstanding claims and that the deed could be conveyed to my name only - I had to file it with the town for the deed records to be correct.

I also have interest in this Form 706 - which I did not know needed to be filled out. I'm past the window of submitting it but will be following this thread to see if anyone can give more information on what kind of issues may be created if you don't do the form.
Best of luck,
MakesCents
I should mention that some states may not permit income tax e-filing on behalf of a deceased spouse. I found that out when I tried to e-file my 2020 state return.

On the plus side, I saved the $19.95 state filing fee (H&R Block).

On the minus side, I had to scan in a bunch of IRS forms. Expect to spend some time compiling and organizing the forms.

Tip: Get a good desktop scanner. You'll need it throughout the year as you submit forms to a lot of places. Everyone wants a copy of something. Using a cellphone to take a photo is OK, but they'll never get the level of resolution needed for a death certificate.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.
DebiT
Posts: 994
Joined: Sat Dec 28, 2013 12:45 pm

Re: [Spouse recently passed away. Please help me handle his financial matters]

Post by DebiT »

Bonnie, my sincere condolences. I have to be brief at the moment, but just wanted to say that my husband died suddenly at age 63 2 years ago. I too was in charge of the finances which was a great help. Everything felt very overwhelming.

It is just in the last month or two that I can look at the life insurance money as part of my portfolio and not something that must be only cash. So my suggestion is just do what feels safe for now. All cash or MM is not ideal for long term, but for now it is ok.

Later, please make a note to investigate Social Security survivors benefits. I believe you must be at least age 60, and that until you reach full retirement age (FRA) there is an earnings limit which applies if you are still working. Finding out about that changed my planned retirement date significantly.

You're getting great advice here. Keep a notebook, go slowly, give yourself time.

Although I never liked Facebook much, it turns out there are many groups, including groups for widows. Those have helped me tremendously.

Hugs to you for now!
Age 66, life turned upside down 3/2/19, thanking God for what I've learned from this group. AA 40/60 for now, possibly changing at age 70.
MakesCents
Posts: 15
Joined: Wed Apr 14, 2021 2:51 pm

Re: [Spouse recently passed away. Please help me handle his financial matters]

Post by MakesCents »

As for Social Security survivor benefits, do not get re-married before you turn 60. I'm so sure that is Far from your mind.
Also there are income limits to get the full benefit from survivor benefits, I think it's around 17k you can make before they start taking benefits away, but that changes.

Food for thought, but put it in the back of your head, and deal with what you can right now. Just being aware of, as you said, what do I ask, is so important.

MakesCents
DebiT
Posts: 994
Joined: Sat Dec 28, 2013 12:45 pm

Re: [Spouse recently passed away. Please help me handle his financial matters]

Post by DebiT »

Bennie, a friend of mine who was suddenly widowed at 39 ended up creating an amazing foundation, website, and workshop program, under the umbrella Soaring Spirits. There is a moderated forum for grief support, many other resources, and the following link has a newly widowed checklist that I found very helpful. I’m sure there are others online as well.

https://soaringspirits.org/wp-content/u ... nsider.pdf

Something I remember re credit cards, is that if he was primary cardholder and I wasn’t, they cancelled the card upon being notified of his death. So if for any reason you don’t have cards where you are the primary, maybe set open those first. It felt very disconcerting to have long term cards cancelled, even though I had others of my own.
Age 66, life turned upside down 3/2/19, thanking God for what I've learned from this group. AA 40/60 for now, possibly changing at age 70.
RudyS
Posts: 2819
Joined: Tue Oct 27, 2015 10:11 am

Re: [Spouse recently passed away. Please help me handle his financial matters]

Post by RudyS »

LadyGeek wrote: Wed Apr 14, 2021 4:22 pm
On the minus side, I had to scan in a bunch of IRS forms. Expect to spend some time compiling and organizing the forms.

Tip: Get a good desktop scanner. You'll need it throughout the year as you submit forms to a lot of places. Everyone wants a copy of something. Using a cellphone to take a photo is OK, but they'll never get the level of resolution needed for a death certificate.
You will definitely want the ability to scan documents, but both of my relatively inexpensive printers (Brother laser, Canon inkjet) have good scanning capability, so depending on what you have, separate scanner may not be needed.
beachmom
Posts: 59
Joined: Thu Feb 14, 2013 4:38 am

Re: [Spouse recently passed away. Please help me handle his financial matters]

Post by beachmom »

I am so sorry for your loss. I lost my husband in Feb. 2020 when he was 58 and I was 54.
Losing a spouse is very hard and the "brain fog" is real. Please ignore all the back and forth about inflation rates and just take baby steps. No major decisions for 6 months to a year.

NotPatience had a good post with a draft schedule of things to do. Gather information about where all the accounts are, how they are titled (ex. joint, individual, payable on death) and what your options are. Read the wiki articles recommended.

Did you have your will created by an attorney or is it an online form? If it was an attorney, you might consider contacting that attorney to assist in the estate settlement. If your county's clerk of court's office can give you information about how to settle the estate.

For 2020 taxes I would file in the same way you previously had i.e. use the same preparer whether paid or do it yourself. Do consider the married filing joint status as it's often advantageous. The tax return will not look much different except for the deceased notation. You will report your husband's income etc. You will still be married for filing purposes in 2021 too so you have months before you need to make any changes related to the filing status.

I forgot and closed our joint accounts too soon, too then I got a late check in his name. What saved me was that I located a small account that I had forgotten about when I closed the others. We did not have to probate my husband's estate because most things went directly to me because of how they were set up. If you do have to use probate you will open an estate account that checks in his name can be deposited into. Money is moved from the account to the heirs (or heir).

A national organization that I have found really helpful is Modern Widow's Club which helps empower widows in all aspects of widowhood.
water2357
Posts: 654
Joined: Sat Sep 12, 2020 9:24 am

Re: [Spouse recently passed away. Please help me handle his financial matters]

Post by water2357 »

About Fidelity Cash Management Account, I just looked at the current interest rate on that account and it appears to be .01%. I'm no expert on Fidelity Cash Management, I'm sure there are many reasons for holding money in that account, including how you are using it and possible fees to transfer or minimum balances required to avoid fees (this would need to be researched). However, if you are just wanting to hold cash, e.g. for an emergency fund or until you have time to consider what longer term investing you want to do, there are many options that will at least get you more than .01% that are also federally insured (if that is a must).

Either look online (or in some boglehead threads) for suggestions of online banks with higher savings, checking, or money market rates. And/or look online or call a bunch of local banks in your area that you can deal with online, driveup, by appointment, etc. and fiind out what their savings, checking, money market rates are.

The best local rate I've seen (that is not a very limited special offer) is at an FDIC insured bank's money market for up to .5% depending on the amount in the account. But even at very low balances, they pay .2% or more. It may not be tons of interest, but it's a lot better than .01%.

Credit Unions and banks may also have some very short term CD rates that are certainly better than .01%. And as mentioned, various boglehead threads get into where to find the best rates (although often these are short term specials that would require moving money again or have limits on the amounts that can earn the higher rate).

Nothing overly urgent, but if you have a large amount of money just sitting around while deciding on what to do for the future (which is perfectly fine), it would not take much effort to at least get yourself a better federally insured rate than .01%.

And if you want to keep more than $250,000 in a particular bank/credit union, consider opening both an account just in your name (indiviaual account) and another differently titled account. An example of another type of account, is a payable on death account (POD) also known as an "in trust for" account or a revocable trust account and all this is, is an acount with your name on it where you have named a beneficiary for the account. Almost all banks and credit unions offer these accounts, you can change the beneficiary at any time, all the income is reported under your SS#, you have complete control to close the account, etc. It's just a regular CD, savings, money market, etc with a beneficiary, but it should give you at least another $250,000 in federal insurance (insurance limit depends on number of beneficiaries named). Again use the fdic web site (or ncua for cedit unions) to check your insurance limits.
User avatar
Topic Author
Bennie
Posts: 415
Joined: Wed Apr 07, 2021 3:46 pm

Re: [Spouse recently passed away. Please help me handle his financial matters]

Post by Bennie »

I am trying to understand Roth IRAs and am not sure about the conversion idea: is there a limit on conversion? If I convert my husband's (inherited) traditional IRA to a Roth for myself, can one take the entire amount or only up to the limit for the year, like the contributions?

Also, is there a limit on conversions? Can you only convert one account or can you do any acount any time??
Carl53
Posts: 2687
Joined: Sun Mar 07, 2010 7:26 pm

Re: [Spouse recently passed away. Please help me handle his financial matters]

Post by Carl53 »

Bennie wrote: Mon Apr 19, 2021 12:06 am I am trying to understand Roth IRAs and am not sure about the conversion idea: is there a limit on conversion? If I convert my husband's (inherited) traditional IRA to a Roth for myself, can one take the entire amount or only up to the limit for the year, like the contributions?

Also, is there a limit on conversions? Can you only convert one account or can you do any acount any time??
You can can convert any amount, whole accounts or portions thereof. Other considerations dictate how much you might convert. What are your current and future marginal tax rates, will you do QCDs once you are age 70, what are your heirs likely marginal tax rates, when you might take social security, IRMAA cliff taxes etc? We have been doing some each year over the last decade but are not reducing the balance due to gains. Others are more aggressive converting their whole pretax IRAs over a couple of years if their circumstances warrant doing so.
User avatar
LadyGeek
Site Admin
Posts: 95466
Joined: Sat Dec 20, 2008 4:34 pm
Location: Philadelphia
Contact:

Re: [Spouse recently passed away. Please help me handle his financial matters]

Post by LadyGeek »

The wiki has some general guidelines for deciding if you should do the conversion. See: Roth IRA conversion

Put traditional-to-Roth IRA conversions as a low priority. Not only do you need to have a complete picture of your current finances, but you should also have a good idea of what your financial state will be when you need the money (retirement).

Right now, there are too many moving parts to figure this out. Wait a few months for things to settle out. Make a decision later.

It took me close to 8 months after my husband passed to figure out that I shouldn't do Roth conversions. (I also retired last year and have a good idea of what I'll need in the future.)
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.
User avatar
Eagle33
Posts: 2383
Joined: Wed Aug 30, 2017 3:20 pm

Re: [Spouse recently passed away. Please help me handle his financial matters]

Post by Eagle33 »

Carl53 wrote: Mon Apr 19, 2021 5:40 am
Bennie wrote: Mon Apr 19, 2021 12:06 am I am trying to understand Roth IRAs and am not sure about the conversion idea: is there a limit on conversion? If I convert my husband's (inherited) traditional IRA to a Roth for myself, can one take the entire amount or only up to the limit for the year, like the contributions?

Also, is there a limit on conversions? Can you only convert one account or can you do any acount any time??
You can can convert any amount, whole accounts or portions thereof. Other considerations dictate how much you might convert. What are your current and future marginal tax rates, will you do QCDs once you are age 70, what are your heirs likely marginal tax rates, when you might take social security, IRMAA cliff taxes etc? We have been doing some each year over the last decade but are not reducing the balance due to gains. Others are more aggressive converting their whole pretax IRAs over a couple of years if their circumstances warrant doing so.
Because you are 53 you would need to wait 5 years on any Roth conversions before getting penalty & tax free access to the converted amount.

As LadyGeek said
Right now, there are too many moving parts to figure this out. Wait a few months for things to settle out. Make a decision later.
Take the time to educate yourself on the various financial options available to you. Then make a educated plan before implementing the plan.
water2357
Posts: 654
Joined: Sat Sep 12, 2020 9:24 am

Re: [Spouse recently passed away. Please help me handle his financial matters]

Post by water2357 »

If your "effective marginal tax rate" today is generally higher than what you estimate it to be during retirement, you may not want to do a ROTH conversion since you will potentially be paying more tax today to convert, than you will pay when withdrawing traditional IRA monies in retirement.

However, you need to consider all the "taxes" of every kind that will be affected by your income level in retirement. And that includes IRMAA (increased Medicare premiums triggered by higher income after two years before age 65), accrued interest on Savings Bonds, impact of Social Security on tax rate, impact of RMDs from any traditional IRAs after age 72, etc. whatever will cause you to pay more or less tax in retirement vs today.

ROTH conversions can work to lower your "effective marginal tax rate" during retirement since converting now will decrease the amount of RMDs from traditional IRAs. But as mentioned by others there are many things to consider.

If you do determine that your "effective marginal tax rate" today appears to be lower than what you estimate your rate may be in retirement, then you may want to work in some ROTH conversions in the next few years.

One important thing to remember is that the closer you get to retirement, particularly within two years of retirement (age 65), you are going to have to deal with the impact of IRMAA (the increased Medicare premiums based on income). If you bump up your income with ROTH conversions in those two years before age 65 (and years after 65) you are potentially going to have to pay IRMAA. IRMAA is based on your income two years prior to the current year. IRMAA is on a cliff basis, so if you go $1 over the cliff you will potentially be paying thousands of dollars more in "taxes" (increased premiums).

So, while you should take time to evaluate all the consequences of ROTH conversions, keep in mind that it may be better to do some conversions (if that makes sense in your particular case) before the two years prior to age 65, i.e. before any of your years of income are used to determine IRMAA.
User avatar
LadyGeek
Site Admin
Posts: 95466
Joined: Sat Dec 20, 2008 4:34 pm
Location: Philadelphia
Contact:

Re: [Spouse recently passed away. Please help me handle his financial matters]

Post by LadyGeek »

^^^ A quick administrative note - Roth is not an acronym. It's the name of a US Senator. From the wiki: Roth IRA
Named after US Senator William Roth, Roth IRAs were established by the Taxpayer Relief Act of 1997.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.
User avatar
Topic Author
Bennie
Posts: 415
Joined: Wed Apr 07, 2021 3:46 pm

Re: [Spouse recently passed away. Please help me handle his financial matters]

Post by Bennie »

Again - Thank you all soo much!! I do have to study some of the ideas (and acronyms and what the concepts imply for my case), taking a bit more time, as you suggested, of course.

At the same time, since I have always been the accountant in our relationship, I can shift into this role and be ok with that at times.

What I am wondering is: does a conversion count for 2020 still, if I do it before May 17, 2021 and would that be a good idea because I can file MFJ and stay in my tax bracket for a higher amount of the conversion (and I could do it one more time in 2021 and then would have to file single in 2022), or is the conversion deadline December 31 each year, and/or does it not get affected by my MFJ tax bracket?

As I understand so far, conversion amounts are taxable and count towards your income in your income tax bracket.

[all this is assuming that I do indeed want to convert a certain amount to Roth IRA and it would be over my tax bracket if I file single - also, I would like to do it ASAP to put those funds into higher risk/ higher yield investments since that is where the benefit of the Roth IRA comes in - I would not convert anything I need immediately, of course - this would be for my 70s and 80s and beyond, if I get to be that old - I am not worried about my heirs' tax brackets]
MP173
Posts: 2607
Joined: Fri Dec 07, 2007 5:03 pm

Re: [Spouse recently passed away. Please help me handle his financial matters]

Post by MP173 »

I have not read thru all three pages but have gone thru this experience (20 years ago).

Here is my advise....

1. You do NOT have to make important investment decisions today, or tomorrow. Park the money in a cash account that is safe and secure.
2. Seek counsel, either a good attorney or a better yet an accountant. Probably will only need an accountant that is well versed in the local and state tax requirements.
3. Seek out a fee only advisor - recommend someone who charges you by the hour or flat fee rather than someone who will make money off of your financial decisions. Or do it yourself...but understand that it will take quite a bit of time to get up to speed on financial planning. Fortunately for me, I had handled all finances in our family and had two years of planning before the death of my wife. I planned ahead (also had 2 sons to raise) but I was still in a daze for quite sometime.
4. This is going to sound a bit strange, but learn to say "NO" to family or friends who come to you for $$$$. Trust me, there is a good possibility that will occur.
5. Finally, take good care of yourself. Mentally and physically. Seek help as needed.

I wish you well,

Ed
water2357
Posts: 654
Joined: Sat Sep 12, 2020 9:24 am

Re: [Spouse recently passed away. Please help me handle his financial matters]

Post by water2357 »

The IRS extended the deadline for IRA contributions attributable to 2020 to May 17, 2021. A conversion is not a contribution.

A couple years ago, the IRS specifically disallowed the ability to "unconvert" ("recharacterize") ROTH conversion monies after the end of a particular calendar year. So, I doubt that the IRS would ever change the deadline for ROTH conversions attributable to a particular year and make it later than December 31st of that year. You need to have made the decision about what you want to convert for e.g. 2020 by 12/31/20 and you can't change it after 12/31/20, likewise you must make the decision and convert whatever you want to convert for 2021 by 12/31/21 and you can't change it after 12/31/21. You can check the IRS web site for the recent changes to various deadlines due to covid-19 if there have been any more changes.

If you want to do a ROTH conversion for 2021 it must be done before 12/31/21. You will need to be sure you have a very good estimate of your 2021 taxable income with and without the conversion or you may get an unpleasant surprise when you file your taxes. Also, if you want to convert the full amount of what you "withdraw/transfer" from your traditional IRA, you need to either up your withholding to pay the increased tax or file estimated tax payments. And the estimated tax filing deadline for 2021 was 4/15/21 for the simplest quarterly payments. You can pay estimated tax as you get the income, however you will need to review IRS form 2210 and possibly follow the rules for income earned/received unevenly throughout the year. And the income periods on the 2210 form are not by quarter, so it's a bit messy. Here's a link to the form.

https://www.irs.gov/forms-pubs/about-form-2210
water2357
Posts: 654
Joined: Sat Sep 12, 2020 9:24 am

Re: [Spouse recently passed away. Please help me handle his financial matters]

Post by water2357 »

Here's a link to the Estimated Tax Form that you have to file during 2021 if you don't have enough withholding.

https://www.irs.gov/forms-pubs/about-form-1040-es
User avatar
Topic Author
Bennie
Posts: 415
Joined: Wed Apr 07, 2021 3:46 pm

Re: [Spouse recently passed away. Please help me handle his financial matters]

Post by Bennie »

water2357 wrote: Thu Apr 22, 2021 12:45 pm The IRS extended the deadline for IRA contributions attributable to 2020 to May 17, 2021. A conversion is not a contribution.

A couple years ago, the IRS specifically disallowed the ability to "unconvert" ("recharacterize") ROTH conversion monies after the end of a particular calendar year. So, I doubt that the IRS would ever change the deadline for ROTH conversions attributable to a particular year and make it later than December 31st of that year. You need to have made the decision about what you want to convert for e.g. 2020 by 12/31/20 and you can't change it after 12/31/20, likewise you must make the decision and convert whatever you want to convert for 2021 by 12/31/21 and you can't change it after 12/31/21. You can check the IRS web site for the recent changes to various deadlines due to covid-19 if there have been any more changes.

If you want to do a ROTH conversion for 2021 it must be done before 12/31/21. You will need to be sure you have a very good estimate of your 2021 taxable income with and without the conversion or you may get an unpleasant surprise when you file your taxes. Also, if you want to convert the full amount of what you "withdraw/transfer" from your traditional IRA, you need to either up your withholding to pay the increased tax or file estimated tax payments. And the estimated tax filing deadline for 2021 was 4/15/21 for the simplest quarterly payments. You can pay estimated tax as you get the income, however you will need to review IRS form 2210 and possibly follow the rules for income earned/received unevenly throughout the year. And the income periods on the 2210 form are not by quarter, so it's a bit messy. Here's a link to the form.

https://www.irs.gov/forms-pubs/about-form-2210
Very helpful - Thank you so much - So if I understand correctly, I don't have anything to think about for 2020 for Roth IRA conversions, since it is too late for that. Right?

For 2021 I missed the deadline for quarterly filing but may increase my withholdings if I plan to convert a substential amount (whatever that is by the IRs rules) so the IRS gets the money in a timely fashion, right?

I am pretty sure I want to convert at least some of the investments to Roth IRA. It is all a guessing game, but if I can afford it, I think it is wise to have some in Roth. I honestly don't know about the future versus today with taxes. That is hard to say. Depends on how long I can work. Working until 60 would be different from working until 72. There are so many factors. I think the important part is that I do think about the future and not spend the money. :D

The conversion would make sense in 2021, though, as far as I understand since I can still file MFJ and my husband had almost no income in 2021 since he died in January, so convert in 2021 and stay in the same tax bracket. Am I thinking about this correctly?

How do you find a good accountant whom you can trust? Is there a site with recommendations for each geographical area?
User avatar
Topic Author
Bennie
Posts: 415
Joined: Wed Apr 07, 2021 3:46 pm

Re: [Spouse recently passed away. Please help me handle his financial matters]

Post by Bennie »

MP173 wrote: Tue Apr 20, 2021 5:08 pm I have not read thru all three pages but have gone thru this experience (20 years ago).

Here is my advise....

1. You do NOT have to make important investment decisions today, or tomorrow. Park the money in a cash account that is safe and secure.
2. Seek counsel, either a good attorney or a better yet an accountant. Probably will only need an accountant that is well versed in the local and state tax requirements.
3. Seek out a fee only advisor - recommend someone who charges you by the hour or flat fee rather than someone who will make money off of your financial decisions. Or do it yourself...but understand that it will take quite a bit of time to get up to speed on financial planning. Fortunately for me, I had handled all finances in our family and had two years of planning before the death of my wife. I planned ahead (also had 2 sons to raise) but I was still in a daze for quite sometime.
4. This is going to sound a bit strange, but learn to say "NO" to family or friends who come to you for $$$$. Trust me, there is a good possibility that will occur.
5. Finally, take good care of yourself. Mentally and physically. Seek help as needed.

I wish you well,

Ed
Thanks so much, Ed. I am so sorry you had to go through this. Thank you for taking the time to respond and for your kind words.

Yes, the "parking in a cash account" sounds like the way to go this year.

Yes, I, too, have handled all our finances all our lives - I just never had to deal with anything like this. You are right, there is a lot of learning to be done.
Last edited by Bennie on Thu Apr 22, 2021 4:44 pm, edited 1 time in total.
User avatar
Topic Author
Bennie
Posts: 415
Joined: Wed Apr 07, 2021 3:46 pm

Re: [Spouse recently passed away. Please help me handle his financial matters]

Post by Bennie »

water2357 wrote: Thu Apr 22, 2021 12:45 pm The IRS extended the deadline for IRA contributions attributable to 2020 to May 17, 2021. A conversion is not a contribution.

A couple years ago, the IRS specifically disallowed the ability to "unconvert" ("recharacterize") ROTH conversion monies after the end of a particular calendar year. So, I doubt that the IRS would ever change the deadline for ROTH conversions attributable to a particular year and make it later than December 31st of that year. You need to have made the decision about what you want to convert for e.g. 2020 by 12/31/20 and you can't change it after 12/31/20, likewise you must make the decision and convert whatever you want to convert for 2021 by 12/31/21 and you can't change it after 12/31/21. You can check the IRS web site for the recent changes to various deadlines due to covid-19 if there have been any more changes.

If you want to do a ROTH conversion for 2021 it must be done before 12/31/21. You will need to be sure you have a very good estimate of your 2021 taxable income with and without the conversion or you may get an unpleasant surprise when you file your taxes. Also, if you want to convert the full amount of what you "withdraw/transfer" from your traditional IRA, you need to either up your withholding to pay the increased tax or file estimated tax payments. And the estimated tax filing deadline for 2021 was 4/15/21 for the simplest quarterly payments. You can pay estimated tax as you get the income, however you will need to review IRS form 2210 and possibly follow the rules for income earned/received unevenly throughout the year. And the income periods on the 2210 form are not by quarter, so it's a bit messy. Here's a link to the form.

https://www.irs.gov/forms-pubs/about-form-2210
[ quote fixed by admin LadyGeek]

Very helpful - Thank you so much, water2357! Very much appreciate you taking the time to respond and the links to the documents.

So if I understand correctly, I don't have anything to think about for 2020 for Roth IRA conversions, since it is too late for that. Right?

For 2021 I missed the deadline for quarterly filing but may increase my withholdings if I plan to convert a substential amount (whatever that is by the IRs rules) so the IRS gets the money in a timely fashion, right?

I am pretty sure I want to convert at least some of the investments to Roth IRA. It is all a guessing game, but if I can afford it, I think it is wise to have some in Roth. I honestly don't know about the future versus today with taxes. That is hard to say. Depends on how long I can work. Working until 60 would be different from working until 72. There are so many factors. I think the important part is that I do think about the future and not spend the money. :D

The conversion would make sense in 2021, though, as far as I understand since I can still file MFJ and my husband had almost no income in 2021 since he died in January, so convert in 2021 and stay in the same tax bracket. Am I thinking about this correctly?

How do you find a good accountant whom you can trust? Is there a site with recommendations for each geographical area?
water2357
Posts: 654
Joined: Sat Sep 12, 2020 9:24 am

Re: [Spouse recently passed away. Please help me handle his financial matters]

Post by water2357 »

I don't know of any exceptions for 2020, so I'd say it's too late for 2020. However, the IRS only recently released some of the tax publications for 2020, which is why I earlier suggested looking over the publications for IRA contributions/conversions/withdrawals. There are two publications 590A and 590B. Also, there is a publication on Estimated Taxes that would be helpful that was just released for 2021. I believe that is 505.

https://www.irs.gov/forms-pubs/about-publication-590-a

https://www.irs.gov/forms-pubs/about-publication-590-b

https://www.irs.gov/forms-pubs/about-publication-505

If you can increase your withholding enough to cover the tax on the conversion, then you don't need estimated tax for that, since the irs considers withholding as if it is paid evenly throughout the year (even if it's not).

I think a few others have commented on the use of married tax rates for 2021, as they stated, dependent on the difference between that option and future single rates. I have not looked at that issue.

As for finding a good CPA, start with asking for recommendations from other people you trust or a lawyer you trust, etc. and follow that up with doing some research into their current status, be sure they are up to date on their continuing education creits, check with the association that certifies them, just as you can check up of lawyers or actuaries or others who must maintain professional credentials. Then meet with a couple CPAs and see if they are someone you can work with. It may also help if they are in a firm that has some back up, so that if they retire/move on the firm will have your records and can continue working with you with no interruption.
water2357
Posts: 654
Joined: Sat Sep 12, 2020 9:24 am

Re: [Spouse recently passed away. Please help me handle his financial matters]

Post by water2357 »

One place to check for CPA status

https://www.aicpa.org/

"We are the American Institute of CPAs, the world’s largest member association representing the accounting profession. Our history of serving the public interest stretches back to 1887. Today, you'll find our 431,000+ members in 130 countries and territories, representing many areas of practice, including business and industry, public practice, government, education and consulting."
User avatar
LadyGeek
Site Admin
Posts: 95466
Joined: Sat Dec 20, 2008 4:34 pm
Location: Philadelphia
Contact:

Re: [Spouse recently passed away. Please help me handle his financial matters]

Post by LadyGeek »

You need to find the right CPA. The wiki has some background info: Financial planner

Read the sections "Certified Public Account (CPA)" and "Background checks".
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.
User avatar
Eagle33
Posts: 2383
Joined: Wed Aug 30, 2017 3:20 pm

Re: [Spouse recently passed away. Please help me handle his financial matters]

Post by Eagle33 »

Bennie wrote: Thu Apr 22, 2021 3:49 pm The conversion would make sense in 2021, though, as far as I understand since I can still file MFJ and my husband had almost no income in 2021 since he died in January, so convert in 2021 and stay in the same tax bracket. Am I thinking about this correctly?
Sorry for your loss.

Yes, take advantage of the lower income this year when your MFJ tax brackets are twice the size as filing single.
User avatar
Topic Author
Bennie
Posts: 415
Joined: Wed Apr 07, 2021 3:46 pm

Re: [Spouse recently passed away. Please help me handle his financial matters]

Post by Bennie »

Eagle33 wrote: Sat Apr 24, 2021 9:44 pm
Bennie wrote: Thu Apr 22, 2021 3:49 pm The conversion would make sense in 2021, though, as far as I understand since I can still file MFJ and my husband had almost no income in 2021 since he died in January, so convert in 2021 and stay in the same tax bracket. Am I thinking about this correctly?
Sorry for your loss.

Yes, take advantage of the lower income this year when your MFJ tax brackets are twice the size as filing single.
Thank you!
User avatar
Topic Author
Bennie
Posts: 415
Joined: Wed Apr 07, 2021 3:46 pm

Re: [Spouse recently passed away. Please help me handle his financial matters]

Post by Bennie »

water2357 wrote: Fri Apr 23, 2021 6:28 pm I don't know of any exceptions for 2020, so I'd say it's too late for 2020. However, the IRS only recently released some of the tax publications for 2020, which is why I earlier suggested looking over the publications for IRA contributions/conversions/withdrawals. There are two publications 590A and 590B. Also, there is a publication on Estimated Taxes that would be helpful that was just released for 2021. I believe that is 505.

https://www.irs.gov/forms-pubs/about-publication-590-a

https://www.irs.gov/forms-pubs/about-publication-590-b

https://www.irs.gov/forms-pubs/about-publication-505

If you can increase your withholding enough to cover the tax on the conversion, then you don't need estimated tax for that, since the irs considers withholding as if it is paid evenly throughout the year (even if it's not).

I think a few others have commented on the use of married tax rates for 2021, as they stated, dependent on the difference between that option and future single rates. I have not looked at that issue.

As for finding a good CPA, start with asking for recommendations from other people you trust or a lawyer you trust, etc. and follow that up with doing some research into their current status, be sure they are up to date on their continuing education creits, check with the association that certifies them, just as you can check up of lawyers or actuaries or others who must maintain professional credentials. Then meet with a couple CPAs and see if they are someone you can work with. It may also help if they are in a firm that has some back up, so that if they retire/move on the firm will have your records and can continue working with you with no interruption.
Very helpful! Thank you!
User avatar
Topic Author
Bennie
Posts: 415
Joined: Wed Apr 07, 2021 3:46 pm

Re: [Spouse recently passed away. Please help me handle his financial matters]

Post by Bennie »

water2357 wrote: Fri Apr 23, 2021 7:38 pm Here is a more direct link to "Find a CPA"

https://www.aicpa.org/forthepublic.html

https://www.aicpa.org/forthepublic/findacpa.html
LadyGeek wrote: Fri Apr 23, 2021 8:03 pm You need to find the right CPA. The wiki has some background info: Financial planner

Read the sections "Certified Public Account (CPA)" and "Background checks".
Thank you both! The problem I have with CPAs and financial planners is that, for example my neighbor is a CPA and I would not feel good about having him know all the details of my financial troubles, outlook, windfalls, net worth, etc. Do people do this? Just tell a stanger all about their financial lives? How is it kept confidential and how can people (who advise you) not be affected by it if they have much more or much less than you, both in obligations and in means? Seems strange to me. The only one I ever discussed our finances with was my husband. We did not even talk to anybody else in the family. Always thought it was best kept private.

Are there some on the forum who feel the same way? I am thinking it would be best to educate myself and, even if I lose out on a tax savings here or there or make some other mistake, only ask general questions when involving other individuals (who have the right to their own feelings and reactions if you rub their nose in your business)?
User avatar
LadyGeek
Site Admin
Posts: 95466
Joined: Sat Dec 20, 2008 4:34 pm
Location: Philadelphia
Contact:

Re: [Spouse recently passed away. Please help me handle his financial matters]

Post by LadyGeek »

Yes, that's how it works. The CPA or other financial professionals need the information to do their job. If you don't give them all the details, they may not give you the right advice. All they care about are the numbers. They don't want to know personal details like who's on speaking terms with your family.

They are under strict confidentiality agreements, so it's not too much of a concern. If they talked about their clients' personal situations, they would not only lose their license, but all their clients.

However, this saying does apply: "Never do business with friends or relatives. You'll lose your friends and you can't get rid of your relatives."

You don't want a friend to know everything about you. The best approach is to ask your CPA friend to recommend someone who can take your case.

There's nothing like having an experienced professional review your situation. They know what can / can't be done and have insight on things you might have never thought about. It's a second set of eyes that will give you confidence as you start the next chapter of your life.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.
User avatar
RickBoglehead
Posts: 7852
Joined: Wed Feb 14, 2018 8:10 am
Location: In a house

Re: [Spouse recently passed away. Please help me handle his financial matters]

Post by RickBoglehead »

LadyGeek wrote: Mon Apr 26, 2021 7:07 am However, this saying does apply: "Never do business with friends or relatives. You'll lose your friends and you can't get rid of your relatives."
This statement cannot be emphasized enough. I'm often amazed at people who do business with a friend or relative, then things fall apart, and the relationship changes or ends. This is a hard rule in my family. I've only broken it once, putting a roof on my in-law's house, with a step-relative, and I made him sign a form saying that he would be treated like any non-family business if things went bad.
Avid user of forums on variety of interests-financial, home brewing, F-150, EV, home repair, etc. Enjoy learning & passing on knowledge. It's PRINCIPAL, not PRINCIPLE. I ADVISE you to seek ADVICE.
water2357
Posts: 654
Joined: Sat Sep 12, 2020 9:24 am

Re: [Spouse recently passed away. Please help me handle his financial matters]

Post by water2357 »

Credentialed financial/legal professionals are governed by disciplinary boards. They lose their licenses if they don't act appropriately. They have professional codes of conduct. They can be disqualified from practicing if they don't maintain their continuing education. Many are also answerable to the federal and/or state governments and can be disbarred.

The more education you personally have about your situation the better. But no one can know everything. Professional advice can steer you on the right path and prevent some costly mistakes. But definitely educate yourself, you may find that there are somethings that you can do for yourself successfully that would be too costly for someone else to do. Although a professional can also give you advice as to when to cut your losses and know when a certain action will not truly be worthwhile.

Make sure you understand how they are charging you for their services and that they are not getting commissions by trying to sell you something, like certain investment products. It can also help, particularly in e.g. a more complicated estate, to get the advice or work with a couple professionals. The CPA may have part of the solution, the lawyer may have part of the solution, the certified financial planner may help, an enrolled actuary may be of help, etc. Ask questions if you don't understand or get contradictory answers. No one is always right, you learn from questioning. Just remember to do so within reason and watch the billable hours and what exactly is being done for their fee.

And as others have said, best to keep the details of your finances limited to only those within your trusted household and the professionals you have chosen. But it can help to ask others for recommendations, just keep it general and don't commit to using any recommendation. You must make the final decision as to who you trust and can work with.

Also, most professionals have dealt with various situations hundreds of times and they know immediately what needs to be done, whereas it would take the average person months to solve the problem, if ever. A good CPA, lawyer, etc. can really take the stress out of complicated situations.
User avatar
Topic Author
Bennie
Posts: 415
Joined: Wed Apr 07, 2021 3:46 pm

Re: [Spouse recently passed away. Please help me handle his financial matters]

Post by Bennie »

Ok, I am trying to warm up to this. :happy

Thank you all for chiming in! Very important and much appreciated.

I am doing a few things on my own already - off to close accounts tomorrow but only with $100.- in them, so no huge mistakes there. :D

I will try to study the tax document links you gave me and ask more questions here, too, as so many have offered to help so kindly. I do like understanding things myself, though, I can see how the tax law can get complicated.

For Roth IRA conversions this year, I could also elect to have the IRS keep the 2020 return towards the 2021 taxes, I think. And then ask my employer to take out extra withholding - did look that up and that seems to work fine.

So far I can see where i may lose some money if I am making mistakes, but I think the bulk of it will be the same, with or without advice/mistakes.

Sometimes I am still very hesitant: I think of Lucy Ball who said to make sure your mistakes are your own when you make them, and a friend of mine who had to pay a huge tax penalty after a professional filed for her and got it wrong - it was still her responsibility and signature at the end and she had to pay the fines.

Still, I will inch myself forward and take a look at the ways to find a qualified professional that you suggested here.

Does anyone have an example of a costly mistake someone made that could have been avoided with professional advice? Just curious.

I can think of one, possibly: if I roll the bulk of the money into an inherited IRA, it seems to be unclear (even when I ask Fidelity experts) if I need to take it all out in 10 years' time and if I can roll it, or parts of it, in steps maybe, into a traditional IRA after it has been put into an inherited IRA first. That may make a big difference, if I am forced to take out everything I have not used after 10 years and I cannot roll it into a personal, traditional IRA then. Sorry, if you feel like you told me already - I am still getting iffy answers from Fidelity on this.
DebiT
Posts: 994
Joined: Sat Dec 28, 2013 12:45 pm

Re: [Spouse recently passed away. Please help me handle his financial matters]

Post by DebiT »

I am no expert, but I believe that a spousal IRA is different than an inherited IRA. My husband's IRA was rolled or transferred into an IRA in my name, and it seems to be a typical IRA, no 10 year timetable. I've found that correct terminology is so important here, and sometimes the customer service people helping us don't seem to listen but to only hear the buzzwords.

As for examples of mistakes, the link below is an example of someone on the phone at Social Security telling me something very very wrong. If I had listened, and not filed for my survivor's benefit under my husband's account, I would have missed out on a very large amount of annual income between now and me turning 70, when I will file on my own. They were using the wrong terminology. This group was a lifesaver then

viewtopic.php?f=2&t=297934&p=4897841&hi ... l#p4897841

You're having to absorb a lot of information, but you will get there.
Age 66, life turned upside down 3/2/19, thanking God for what I've learned from this group. AA 40/60 for now, possibly changing at age 70.
techiegirl
Posts: 101
Joined: Sat Nov 07, 2020 10:02 am

Re: [Spouse recently passed away. Please help me handle his financial matters]

Post by techiegirl »

If you’re under 59.5, you can roll over the spousal IRA into an inherited IRA and not have to withdraw within 10 years. You can also withdraw any amount without having to pay penalty.

If you have joint accounts, keep one open for a while. There is bound to be a check or two in his name. Some people recommend keeping account open for 2 years. I had a check I couldn’t deposit because it came in after I closed all the joint accounts. Luckily it wasn’t much money (a buck or so).
techiegirl
Posts: 101
Joined: Sat Nov 07, 2020 10:02 am

Re: [Spouse recently passed away. Please help me handle his financial matters]

Post by techiegirl »

DebiT wrote: Mon Apr 26, 2021 9:58 pm. This group was a lifesaver then
I wish I knew about this group in the beginning stages of my widowhood. Would have saved me from lots of mistakes.
DebiT
Posts: 994
Joined: Sat Dec 28, 2013 12:45 pm

Re: [Spouse recently passed away. Please help me handle his financial matters]

Post by DebiT »

The link below explains what happens when you inherit a spouse's Ira. The rules are different before 59 and 1/2 versus afterwards, but either way you don't have to empty it within 10 years

https://www.thebalance.com/what-happens ... es-3505228
Age 66, life turned upside down 3/2/19, thanking God for what I've learned from this group. AA 40/60 for now, possibly changing at age 70.
User avatar
LadyGeek
Site Admin
Posts: 95466
Joined: Sat Dec 20, 2008 4:34 pm
Location: Philadelphia
Contact:

Re: [Spouse recently passed away. Please help me handle his financial matters]

Post by LadyGeek »

Regarding your late husband's IRA, let's take a step back. From the first mention:
Bennie wrote: Sat Apr 10, 2021 8:46 pm [Thread merged into here --admin LadyGeek]

Background: my husband died in Januray and left me his retirement accounts. I am working but need to replace his income from this money now.

I heard that you can tranfer the monies into an inherited IRA and withdraw immediately without penalty (the money is income before taxes, of course). In fact, according to a change in laws in 2019, apparently the monies have to be withdrawn over a 10-year period.

He was 63 and I am 53.

I would like to try to stretch the monies for 14 years, until I am ready to retire at 67. I have my own retirement accounts with my company after that, I hope.

A financial advisor from a large institution told me, as I understood it, to roll over only what I need in the next 6 and 1/2 years to an inherited IRA and roll the rest to an IRA because after 59 and 1/2 I can withdraw from that without penalty.

It seems that I can also roll monies from an inherited IRA to an IRA, but I am not sure about that. Do you know?

I asked the advisor why I should not roll everything to an iherited IRA, just in case I need it sooner than 6 and 1/2 years from now, and then I could roll the rest (after 10 years) into an IRA, if I have anything left, so it is all out of the inherited IRA in 10 years' time. He said that people may forget, be in a coma, etc. and then there would be a big loss to that person. Hm. I do not tend to forget things like this and I could make arrangements in case I am incapacitated. I would rather have access to the entire amount.

What do you think?
The most important question to ask right now: Is this your husband's IRA and you are the sole beneficiary?

If so, you need to understand a very important concept - Thanks to the IRS, the term "inherited IRA" has a very different meaning than what you think. That term is for someone who's the beneficiary of an IRA, such as a family member - but is not the spouse. The 10 year rule comes into play here.

You have what's called a spousal IRA. You're in the catbird's seat because being a widow gives you extra privileges. Long story short, you can roll your late husband's IRA into your IRA. IOW, you can truly inherit the IRA and make it your own. The money is totally yours and follows the same rules as a regular IRA. No 10 year rule, take the money out just like a regular IRA.

See the wiki: Inheriting an IRA and read the section titled "IRA Inherited from your spouse".

I know how this works because this is exactly what I did with my late husband's IRA when he passed away last year. The best way to handle this is to simply roll the whole thing over into your IRA. Once the paperwork is done, you have one IRA to manage. Much simpler. "Treat as your own" are the magic words here.

Did your late husband also have a Roth IRA? If so, we can answer that question as well. (Taking it slow here.)
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.
water2357
Posts: 654
Joined: Sat Sep 12, 2020 9:24 am

Re: [Spouse recently passed away. Please help me handle his financial matters]

Post by water2357 »

A quick question (don't have time to research this now), I've worked with spousal IRAs where both spouses were over 59 1/2 at the time of the one spouse's passing. And for that situation the surviving spouse basically had the other spouse's IRA retitled as their own and named new beneficiaries as they chose. And the surviving spouse could withdraw monies from the retitled IRA without penalty because they were also over 59 1/2.

I'm not clear on how a spouse younger than 59 1/2 can withdraw from an IRA that is retitled in their name without penalty before they are 59 1/2? Is that possible?

I believe there are ways to retitle the deceased spouse's IRA to allow the surviving spouse to make some types of withdrawals without penalty, but I'm not clear that this "new" IRA can be mixed into the surviving spouse's IRA and keep up the penalty free withdrawals before 59 1/2? Can anyone provide more information on how this works?

Thanks.
User avatar
LadyGeek
Site Admin
Posts: 95466
Joined: Sat Dec 20, 2008 4:34 pm
Location: Philadelphia
Contact:

Re: [Spouse recently passed away. Please help me handle his financial matters]

Post by LadyGeek »

The wiki alludes to this, but I would suggest starting a new thread to avoid complicating Bennie's situation.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.
water2357
Posts: 654
Joined: Sat Sep 12, 2020 9:24 am

Re: [Spouse recently passed away. Please help me handle his financial matters]

Post by water2357 »

I only ask about this because the OP originally indicated that they were interested in withdrawing funds now before age 59 1/2. If the wiki covers this then that should provide the answer. Thanks.

Also, hopefully the wiki gets into the waiting periods for withdrawing from ROTH IRA conversions as well. I know at ages over 59 1/2 there is usually no concern, but below 59 1/2 usually has restrictions.
water2357
Posts: 654
Joined: Sat Sep 12, 2020 9:24 am

Re: [Spouse recently passed away. Please help me handle his financial matters]

Post by water2357 »

This is from Fidelity directly, it may be of value if you are working with Fidelity

https://www.fidelity.com/building-savin ... ed-ira-rmd

It provides some definitions and rules on "inheriting" iras.

It also points out that when you retitle an IRA as your own and you are under 59 1/2 you must follow the normal rules for withdrawals of your own IRA, and for traditional IRAs that can include the 10% penalty, and for ROTH there are 5 year waiting periods. There are various topics under this link that may provide some insight into other information received from Fidelity.

Also, "spousal ira" is often used to refer to an ira that allows contributions, based on a working spouse's income, to an ira set up for a nonworking spouse. This is something different from a spouse inheriting an ira as the sole beneficiary of the deceased spouse's ira.
User avatar
Topic Author
Bennie
Posts: 415
Joined: Wed Apr 07, 2021 3:46 pm

Re: [Spouse recently passed away. Please help me handle his financial matters]

Post by Bennie »

Wow - this is all so valuable - Thank you all so much for taking the time to respond and share! - I still have emotional hurdles that slow me down quite a bit when it comes to taking care of things - I think I will read and read links this weekend to try to process more of the information you listed - I am still working, too.

Quick questions and additional information: my husband's monies were mostly in a 401k with an employer and are still "managed" by that company and Fidelity, mostly. I asked them (the company) and Fidelity if there is a time limit for moving the money. Neither knew. I think the Fidelity rep said he would find out but I have not heard back. (always takes an hour on their machines to get through to somebody, so I gave up for now).
Do you know how a 401K works and what the deadlines and catches are?
What I found out so far, if it is true: if I take out even 1 dollar, the company will not "manage" the 401k anymore and all the money will have to be rolled into another account (IRA or inherited IRA or such) but if I leave it all in, they can keep control of it for me as the "employee or beneficiary of an employee". 401k monies are protected from personal law suits, IRA monies are not. So, if you get sued, it would be better to have a 401k so that money is protected for your retirement.
I am not sure what other rules and catches, advantages and disadvantages, one would need to be aware of. And timing and taxes.

The joint bank account is gone. Professional advice at the bank overruled my desire to leave it open. So sometimes the professionals are not knowledgable either. I have some checks in his name (economic stimulus, pharmacy refund, etc. ) and I will try to get the banker who took his nome off our account to try to deposit them. Otherwise, maybe probate rules will allow me to do so. I still have to go through that.

If you have advice about 401k transitions, please let me know. I hope to catch up on everything this weekend.

I did contact two more institutions this week - credit unions with not much money in them - 100.- dollars in savings - but I had to do it - step by step.
User avatar
LadyGeek
Site Admin
Posts: 95466
Joined: Sat Dec 20, 2008 4:34 pm
Location: Philadelphia
Contact:

Re: [Spouse recently passed away. Please help me handle his financial matters]

Post by LadyGeek »

Regarding 401(k) plans - Once you're terminated with the company, you can roll those into an IRA at any time. However, this is a case where the primary owner passes away. If you are the beneficiary (yes), the company should be notified of his death. Follow their guidance to take ownership. Once that's established, contact Fidelity to roll the 401(k) into Fidelity. If nothing else, it will simplify your financial life because you don't have to deal with the employer any more.

Regarding bank accounts - If the person who took your husband's name off the account can't put it back, you can establish a checking account in the name of the estate. More paperwork, but necessary if a significant dollar amount is involved. First, ask if the name can be put back on the account (it never hurts to ask).

Allowing a deceased person's name to remain on the account is actually bank policy. I discuss that somewhere in my posts, but it's a gray area concerning banking regulations. My bank allowed it, your bank may not. So, don't be disappointed with the bank's management. They may have a legitimate reason.

You're going through the same process I did last year - cleaning up accounts from just about everywhere. This is where taking good notes comes into play. Write down everything and work off a checklist. You'll reduce your anxiety because everything is laid out right in front of you and you know exactly what to do (or what's needed).
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.
water2357
Posts: 654
Joined: Sat Sep 12, 2020 9:24 am

Re: [Spouse recently passed away. Please help me handle his financial matters]

Post by water2357 »

If you have a savings account or money market account (if you don't have another joint checking account) at a bank or credit union in joint names, keep that in joint names, you can deposit checks written out to only the deceased into that account. Have seen different ways to deal with checks in the deceased's name where there was a surviving spouse or named beneficiaries (with and without probate), where there was no need to open an estate account since joint accounts still existed or named beneficiary accounts existed. If you have accounts at several financial institutions, talk to each one, find out their rules and choose the one (or two) that will work with you. If you do have to open an estate account to deposit checks, be aware that you may have to file an estate income tax return (similar to filing a personal income tax return).

Found that some banks are extremely difficult to work with, they do not follow or even seem to know the actual State law (or Federal law) that covers such things as how to handle powers of attorney(ceases at death), access to safe deposit boxes, short certificates, death certificates, medallion signature guarantees, what accounts can be kept open/not retitled, etc. And if you don't get the answers you are looking for from one branch office, go to a different branch. You'd be surprised how service and knowledge differ greatly from branch to branch.

If an estate is opened (probate) and an executor is named, that person has the power, through short certificates issued to them, to act for the estate. If an estate is not opened (no probate), e.g. all assets are joint or there are only named beneficiaries, a spouse or beneficiaries can often handle settling everything. But it still never hurts to have a good lawyer for advice. A good lawyer will work with you to handle everything at the least cost to you.

FYI, An estate account is just e.g. a bank account titled under the name of the estate to hold income etc from estate assets while the estate is being settled. Income earned by an estate, as I indicated above, is taxed possibly requiring its own tax returns to be filed. Opening an estate (probate), as indicated above, does not always require the establishment of an estate account.
User avatar
LadyGeek
Site Admin
Posts: 95466
Joined: Sat Dec 20, 2008 4:34 pm
Location: Philadelphia
Contact:

Re: [Spouse recently passed away. Please help me handle his financial matters]

Post by LadyGeek »

This should help reduce your anxiety a bit:

You never need to sign your husband's name when you endorse a check. Find an account that will take the deposit. Then, all you have to do is print "For Deposit Only" on the back of the check. The bank personnel can confirm, but that's basically all you need to do.

Actually, that holds true everywhere. It's why you can do mobile deposits with a check image and "For mobile deposit only" printed on the back.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.
Post Reply