Tag Archives: disclaimer

Can the Executor Give Away Estate Assets?

historic houseDear Liza: My husband is the sole executor (and only child) of his mother’s Will.  There are no other beneficiaries listed in her Will.  The only asset she had was a home which is valued at about $300,000.  Does he need to probate her Will?  As the executor can he sell the home to one of our children for $1.00? Whether or not your husband has to probate the Will depends upon your state’s small estates limit. In most states, an estate that falls below a certain threshold doesn’t have to go through a formal probate. To find out about your state’s small estate limit, click here. But my guess, is yes, a piece of real property that’s worth $300,000 doesn’t fall below that limit in any state that I can think of.

Whether or not your husband can sell the house for a dollar raises a different issue. The short answer is “No.” Your husband, as the executor, has to follow the terms of the Will (as does the probate court). So, at the end of the probate proceeding, the Court will distribute that house to your husband, since you’ve said that he’s the beneficiary under the Will. At that point, if he wants to sell it for 1$ to your kids, he can do so, BUT, the IRS will consider that a gift of the fair market value of the house, minus that one dollar. Essentially, your husband is giving the house to your kids, and pretending that he sold it to them, right? The IRS gets that, they’ve seen it before.

I’d advise your husband to consult with an estate planning attorney. Depending upon the terms of the Will and the time that’s passed since his mother died, he may be able to disclaim the gift and have it pass directly to your children, as a gift from their grandmother directly. A disclaimer is a legal no-thank-you that must be properly executed within nine months of the date of death and before a person has accepted any benefit from that gift. The house would pass to your children only if the Will says that, if your husband died first, it would then pass to his issue. (Not all Wills would say that, so this depends on what it says.)

If he can’t disclaim, he’s absolutely free to make such a gift himself. He’ll have to file a gift tax return by April of the following year, reporting the gift, but he won’t owe any gift tax on the gift because your husband, like all of us, currently has the ability to give up to $5.34 million during life or at death without paying any gift or estate tax.  The gift of $299,999 will use up that much of his available exemption, leaving him with a bit over $5 million more to use.

You also need to find out whether or not your state imposes an inheritance or estate tax. You’ve told me that you live in Pennsylvania, which does impose such a tax. Click here for a general guide to state inheritance and estate taxes, including Pennsylvania.

Using Disclaimers in Estate Planning

Dear Liza: I am the executor of my aunt’s estate in NJ.   She left a number of payable-on-deaht (POD) accounts to me  but her intention was that most of these funds/accounts be given to charity.  I am trying to avoid paying estate and inheritance tax on them, because then the charities will get less.  Is there a way I can redirect them to the charities before they come to me so as to avoid the taxes? When someone gives you something in a Will, or by beneficiary  designation,you can always say, “No Thank You” and not accept the assets, provided you don’t make use of the asset first, and that you do this within 9 months of the death. This is called ‘disclaiming’ the assets. Legally, it’s as if you died first — the asset is then given to whomever is named as the next beneficiary.  In that case, the gift is from the person who died, not from you.  What you can’t do, however, is direct where the assets go next. So, if your aunt left a Will that said everything in her estate was to go to you, then to charity if you did not survive her, your disclaimer would direct those assets to the charity, via that Will. However, if your aunt’s Will did not specify charities as the next beneficiaries, or did not have a Will and simply left those payable-on-death accounts directly to you, and named no second beneficiary, the only way you can give those assets to charity would be to do it directly as a gift from you. If you disclaimed those assets, they would pass to your aunt’s surviving heirs under New Jersey’s law of intestate succession, not to charity. You can give $13,000 per year to any beneficiary free of the gift tax, or $26,000 if you are married and your spouse agrees to make the same gift.