I am appointed executor for my mother's will. She may have a few thousand left if she lives that long, but all her accounts have all siblings listed as equal beneficiaries. So if there are outstanding bills, expenses, or debts, how do I take care of my legal obligation to pay those off if the financial institutions pay on death directly to the beneficiaries?
What happened in your case is actually the result of proper planning. By designating beneficiaries of each account, they avoid probate.
However, if you act as executor, you will have a personal responsibility to administer the estate properly. That is to say, if it is not done correctly, then you must pay from your personal funds. Therefore it might be a good idea to either get insurance, or retain an attorney who is licensed and insured.
Legal fees and expenses of administration are first priority claim, so it is paid before all others. In Pennsylvania, my state, the priority of claims is set forth in Section 3392 of Title 20 of our laws. Section 3162 of the Code provides that the executor must advertise the grant of letters and notify creditors to bring claims within one year. Also, although the accounts with beneficiaries passed outside probate, there may be Inheritance taxes due on them. It depends upon the state laws where you live. There may also be Medicaid claims due against the estate. As you can see, it can get complicated, but only for someone who has not done it many times before. I hope this information helps.
There are differences: For example in my state, Pennsylvania, you do not file a Notice to Debtors and Creditors and wait 120 days. Rather, you publish a notice in the local paper and the creditors must respond within one year (with some minor exceptions). In my state, Pennsylvania, there is an Inheritance Tax due on every estate, no matter what the value. As you point out in your answer, there is also a Federal Estate Tax for large estates over $5.M, but "Inheritance Taxes" are different from the Federal Estate Tax. Every state has their own law about Inheritance Taxes.
Many of us who practice Estate Planning and Elder Law know Ed S. (nice guy) and about trust to trust transfers of IRA accounts (which were used before Ed came along and marketed them). We frequently set up trusts for protection of beneficiaries to protect against Medicaid claims and more. However, the law directs that you do it at least five years in advance. If you do, it is perfectly legal.
If you have a state specific question about law, I suggest avvo.com where you will get a free answer from a local lawyer, about your state's laws. I think this forum is great for ideas for caregivers, but not the place to post legal questions, because there are 50 different sets of laws, and an answer may be incorrect and harm someone. I also answer questions on Avvo. I will continue to use this site for helpful information about caregiving, but it's not the place for legal questions if there is a much better alternative, more likely to provide the correct answer.
My mother made me joint owner with right of survivorship of all her personal accounts. Upon her death, the accounts became mine and I paid her final bills from those accounts. Thus, there was no need to set up an account called the estate of ____ from which the person's final bills are paid.
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