In Sept my mother passed away. In her will she specified that her estate pays for her burial and other expenses. Through her job she had a deferred compensation plan which I was designated as the sole beneficiary.
My father believes that the deferred compensation is part of the estate and I disagree. I believe the deferred compensation is separate from the estate.
This is putting a rift between us and I need to know if I am correct or if he is.
You need to ask a lawyer licensed in your jurisdiction.
A question though - if the deferred compensation isn’t part of her estate who does it belong to?
It belongs to whomever was the designated benificiary – in this case, the OP.
As far as the IRS is concerned, qualified retirement plans (deferred compensation) go directly to named beneficiaries and are not part of the estate. Wills do not affect how those funds are distributed, only the beneficiary designation in the plan.
But that’s a federal/income tax issue. I wouldn’t rely on that in terms of the actual disagreement you’re having. You’d want to talk to a lawyer about state law.
That was my contention it’s not part of the estate. My father says the money is considered part of the estate. Dracoi, do you know the document # that shows the IRS considers deferred compensation to not be part of the estate? My father was expecting to use it to pay for her burial expenses but he is not exactly penniless.
I on the other hand am about 60k in debt. I was married on 11/1 and my wife paid for most of the wedding. I did withdraw some money from a joint account that was held between my mother and myself.
My plan for this money is to setup an annuity that will protect me from paying taxes on it all at one and as money comes in, build a fund to settle my debts.
I have a deferred comp account and I had to designate a beneficiary. When I had my will done my atty told me that the designated beneficiary would override a will. Contact the financial institution where the def comp account is held and they will tell you.
Legal advice is best suited to IMHO.
Colibri
General Questions Moderator
The proceeds from qualified retirement plans with named beneficiaries, just like proceeds from life insurance, are not probated and therefore not part of the estate. They go directly to the named beneficiary.
Friedo thank you for confirming what I thought was true, but I need something in writing to prove this to my father.
I am a lawyer and I work in commercial, property and estate planning law.
I am surprised that your father won’t accept the words of a random stranger on the internet.
Go and see a lawyer in your jurisdiction.
Because this is a family disagreement you really have two issues: What does the law say, and what do the morals (good and bad) of the participants say.
My wife does some probate and you sometimes see cases where the will divides the estate assets evenly amongst several heirs, but in addition there are certain specific bequests or things like the OP has; POD (pay on death) beneficiary accounts, etc. Which specific things are payable to some, not all, of the same heirs.
There’s often a member of the heir class who didn’t get a specific bequest or POD (or who gets a much smaller one) who insists the “morally right” thing to do is figure out the will distribution such that all the heirs end up even after considering the effect of the other non-estate transfers. After all, Mom said “split my stuff evenly among my kids” or whatever.
The law (at least in the states I’m familiar with as a non-lawyer) is not favorable to this point of view. Nonetheless many families have started multi-generational feuds over it.
Remember the ancient Jewish proverb: “Where there’s a will … … … the relatives are fighting.”
Welcome to the wonderful world of family estate disputes! :smack:
Sounds like your mom and dad did a pretty crappy job of planning and communicating.
Who is the executor of the estate? Will be interesting to see what they say/do. You give no idea of what dollar amounts are involved in the estate/burial/or this acct, or the number of beneficiaries. Will likely need an atty to advise and represent your interests.
As mentioned above, you have to acknowledge that whatever your legal rights, they won’t ensure that your dad will be happy about the outcome. So consider what is in your interest in short vs long-term. I.e. - if this acct is $5k, but if you insist upon it, your dad will write you out of his $100k estate.
BTW - if I were your dad, and were ostensibly happily married to your mom, I can imagine being pissed if she named you as the beneficiary to this acct rather than me w/o telling me.
This.
Give your dad the contact info for the financial institution where the account resides and have them explain it to him.
The deferred compensation is yours as stated up thread. Any joint banking accounts with rights of survivor also belong to the surviving account holder without being part of the estate. In our recent case, my wife was a joint account holder on her Mom’s savings to allow someone to get to the money on the Mom’s behalf (she had had a stroke and there was health based uncertainty).
In that case, my wife divided the savings among her siblings but she had no legal obligation to do so. As also state up thread, the legal and the “right thing for the family” are separate issues. Not knowing the specifics, my example is for info, not a suggestion that you give the funds away.
This was in Virginia since state law can have an impact.