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Car4 · Apr 21, 2007, 12:43 PM

Does anyone know of a statute, specific to the state of Maine, that says when funds are withheld in case there may be a later IRS Estate Audit, that the heirs are not entitled to any interest or growth on those funds that occurred during that witholding period, no matter how long?

excon · Apr 21, 2007, 05:16 PM

Hello Car:

I'm trying to understand what your situation is so that I can give you a good answer. If I understand, you're saying somebody died and left an estate that is NOT being distributed because the IRS MIGHT do an audit??

First, please tell us WHO is holding the funds. WHO told you this? Was there a will? Do you have a lawyer? HOW long are we talking about??

Help us help you.

excon

Car4 · Apr 22, 2007, 04:21 AM

One-fifth of the amount inherited has been held back for over a year if the IRS might want to audit the estate. The final distribution is now being made. The money was not put in an escrow account, nor a savings account or cd. It was kept in securities, which have increased substantially.

The heirs (the children) are being told by the financial advisor where the funds are held that they are not entitled to any of the growth due to "Maine state Law." In other words, if the amount due to be distributed was $500,000 a year ago and experienced growth to $575,000, the extra $75,000 does not go to the children heirs but stays with the wife's account with the financial advisor.

Wasn't he gambling? What if the securites had declined 30%? Wouldn't he then have a problem with the wife's account then being that much less.

excon · Apr 22, 2007, 04:32 AM

Hello again, Car:

I think you're right. Ask him to provide you with the law.

excon

RubyPitbull · Apr 22, 2007, 06:05 AM

I saw this last night and was going to answer but there wasn't enough info. Yes Car, the wife would then be down whatever the loss to the account might have been if the financial advisor mismanaged the money or the market plummeted.

Car, excon is right, you do have every right to request a either a copy of the statute or for him to cite the code so that you can look it up. But, something still doesn't quite add up. I am still a bit confused here. The Estate Laws vary depending on how your father set up his will and assets. Is the financial advisor the executor, or your stepmother? Were funds jointly held by your father and stepmother in a financial portfolio? Or were they totally separate? Was their a specific dollar amount that you and your siblings were left in your father's will or was it a percentage? All of this can make a difference in your situation. You have left out a lot and it makes it very hard to give you the correct information.

If your father and stepmother had joint accounts being held with a financial advisor, there is no law that states she has to separate those funds while the estate is being reconciled. If the funds were held jointly, by law, she does not have to give you a penny even if the will states that you and your siblings are left XX dollars.

So, if you can give us a bit more info as to the situation and based on the questions I asked, we can be a bit more specific. It may very well be that you do not have a right to any interest accumulated.

Car4 · Apr 22, 2007, 07:03 AM

We were given specific $$amount through a trust (which we have never been given a copy of), not the will. Will leaves everything to wife. Wife named as personal representative of the estate. Financial advisor withheld 50k from each child's distribution pending possible audit. This was not segregated and not put in a specific account for the final distribution. When it came time to make the distribution, financial advisor sold securities to come up with the money. The S&P 500 went up 14.75%from 2005 to 2006, so he increased his assets under management in the wife's account but he could just as easily lost.

Shouldn't this money have been set aside separately in the beginning, and is there a statute that says we aren't allowed to earn interest on it? They could have withheld it for three years if they wanted to get sticky.

RubyPitbull · Apr 22, 2007, 07:32 AM

As I stated, you are right, he could just as easily lost money in that account. You are also right in that they could have continued to hold that money for another 2 years if they wanted "to get sticky." They didn't. Count yourself as lucky.

Your father had some very specific paperwork in place. It would be a different story if he died intestate. The bottom line here is, there is no law that states money needed to be set aside into a separate interest yielding account. I am sure the trust was very specific as to what his intentions were, what each of you were entitled to, and how the money was to be handled once your father passed. Trusts are set up to work within the guidelines of the Estate Laws. There is no law that states you are entitled to a copy of the Trust paperwork. Usually, the beneficiaries do not receive copies of that. The executor has a responsibility to satisfy the requirements of the trust. The IRS has very stringent rules when it comes to filing the Estate Tax return. The executor must stick to whatever the will and trusts have outlined. If the trust outlined that the monies were to be held in an interest bearing account, and the tax paperwork showing interest earned is not attached, that is a big red flag to the IRS auditor. So, it is a very safe assumption, that your father set this trust up within the framework of that particular asset account, and did not specify that, upon his death, the monies needed to be pulled from the account and placed into a separate interest bearing only one. He wanted the securities to remain intact until distribution was to be made.

The fact that the trust leaves you a specific $ amount means that you are entitled to that $ amount only. The law does not make special allowances for interests gained. You have been paid exactly what you are entitiled to under the trust.

excon · Apr 22, 2007, 07:34 AM

Hello again, Car:

Thanks. In legal matters details DO count. Now that I know some details, I suggest that you (all the siblings) hire an attorney. You should do so, because 1) it doesn't matter what "should" be, because what "should" be, isn't, 2) you are unaware of your rights and have no idea how to secure them, even if they were explained to you in detail right here, and 3) you can afford it, (in fact, you can't afford not to).

The question I would have, that you didn't address, is WHY any money was withheld in the first place. Every time ANYBODY files a tax return for ANY reason, the return is subject to audit. NO taxpayer, to my knowledge, is ever required to keep money aside in case they're audited. Plus, if the "financial advisor" (a generic term meaning nothing) THINKS there could be an audit, then he might be aware of some hyjinks, or he might have hyjinked himself. That's stuff that you ought to know. And you ought to find out from your own attorney, rather than to have him tell you.

excon

PS> When you hire your attorney, don't make him pull teeth like we had to.

RubyPitbull · Apr 22, 2007, 07:50 AM

Athough I don't disagree with you excon, because it appears that Car has many questions and an attorney should be able to get any explanations that he cannot, I do believe it will be a waste of money on Car's part and drive a further wedge between the children and stepmom. I don't think "hyjinks" is involved here. I do believe that there is at least one, if not more, estate lawyer(s) involved here that handled things for the father prior to his death and that is probably handling things for the wife. I think Car's father knew there would be problems when he died and made sure that everything was in place to protect his assets, his wife's concerns, and the monies he intended on leaving his children.

Car, did you sign paperwork that stated that if you tried to sue the estate that you would be forfeiting any monies handed out to you? Whatever paperwork you are in receipt of, bring that with you if you decide to make an appointment with an attorney who specializes in estates.

By the way excon, regarding the withholding of money for an audit, you are correct, in a way. When an estate is complicated, it can take a few years to resolve. The final distribution is held up only to the extent that the accountant filing the return has to audit what has been done, reconcile everything, and ensure there isn't a problem. Once he agrees that everything looks to be proper, the final monies are usually released. The point in doing this is so that the IRS can avoid having to chase down everyone if calculations were off. Sometimes they do have to do this if there is an audit and they find something amiss. But, there are laws in place that allow the final distribution to be held up to ensure the Feds are getting every penny they are owed.

Car4 · Apr 22, 2007, 07:54 AM

Thanks. In fact, that was to be my next step, to explain the situation to my own attorney, show him the will and what letters and documents I have.

I have been getting different answers from the financial advisor and the attorney for the estate, so something seems amiss.

Car4 · Apr 22, 2007, 07:58 AM

Nothing was signed regarding forfeiting monies received. Really have no intention of suing the estate or anyone else, just trying to make sure everything was done properly.

RubyPitbull · Apr 22, 2007, 08:05 AM

Fair enough Car, fair enough. I think once your attorney checks into it, you will find that everything is being handled the way it should be for you and your sibs. The financial guy doesn't owe anyone any explanation and is trying to avoid having to get into a conversation with you. The estate attorney is the one that has a fiduciary responsibility to make sure he is sticking to the terms of the wills and trust, and to tell the truth to the beneficiaries. The two attorneys will talk, and you will have your answers. Frankly, the person who really has to worry about being screwed over is your stepmother. Financial advisors can be worse than attorneys at times. In any event, I don't like any of these guys. They all want your money.