Lynn Brenner's Family Finance

How Can We Deposit Checks Made Out to My Deceased Father-in-Law?

Q: My wife recently lost her father, who left no will. She is his sole surviving family member. She recently received checks refunding deposits on her father's rental apartment, but they were made out to him. We asked the realtor to change the payee to include her name; but we were told this would not help us deposit the checks either. What must be done to allow her to deposit these checks?-- HA via email

 

A: Your wife should go to Surrogate's Court and ask to be named administrator of her father's estate.

An administrator has the same responsibilities as a person who is named an executor in a will.

It's her job to locate the decedent's assets, pay any outstanding bills, and to file his last income tax return on April 15 2010.  People who die in 2009 still owe the government a 2009 income tax return if their 2009 income was more than $9,350, or more than $10,750 if they were over 65.

 After paying all the bills, the administrator distributes the remaining assets to the heirs. In this case, of course, the administrator is also the heir.

 The court will give your wife 'letters of administration' – legal documents that authorize her to act on behalf of her father's estate.

 She can take those documents to the bank, along with a copy of her father's death certificate, and open an account for the estate. If her father's name was William Johnson, for example, the bank account would be titled For the Estate of William Johnson.

 As the estate's administrator, your wife can endorse any checks that are made out to her late father, and deposit them in the estate's bank account. After the checks clear, she can withdraw the money and distribute it to herself, as his heir.

Can my creditors seize an IRA I inherited from my mother?

Q: I have an inherited IRA from my mother, who passed away several years ago. I also have credit card debt that I cannot pay due to being unemployed. I use the IRA for total support. Can the credit card company invade my IRA if they get a judgment against me? -- AB New York City

 

A: In some states the answer is no; in others it's yes. But the answer for New York residents is still unclear, says Seymour Goldberg, a Melville New York estate lawyer.

The extent to which IRAs are protected from creditors depends on state law.

There are nine states that specifically shield inherited IRAs from creditors. 

In several other states, however, courts have held that inherited IRAs don’t qualify for protection from the beneficiary’s creditors. The question hasn't yet been argued in a New York court, Goldberg says.

New York law protects an IRA from its owner's creditors, but it says nothing about inherited IRAs.

There's a difference.

It’s natural for you to refer to this inherited IRA as yours. But technically, it isn’t yours. It’s still your late mother’s IRA. You are merely the beneficiary, says Ed Slott, a Rockville Centre NY tax accountant and IRA expert.

One difference, for example, is that if it were your own IRA, you could name a beneficiary. Since it's an inherited IRA, you cannot.

When you inherit a spouse’s IRA, you can make it your own by transferring it into a new IRA in your own name.

But every other beneficiary must keep an inherited IRA in the original owner's name to retain its tax-deferred status. If Fred Smith inherited his mother Mary Smith's IRA when she died on January 1, 2006, the account should be titled: `Mary Smith IRA (deceased 1/1/06) for the benefit of Fred Smith’.

 

How Can I Find Out If Someone Left a Will?

Q: How do I find out if my father-in-law left a will? He left three houses and other assets. His widow, who is not the mother of his six children, has told them that "their father did not leave anything for them."

We have reason to believe that he didn’t leave a will – and you’ve written that if someone dies without a will in New York State, their assets are divided between their surviving spouse and children. But his widow doesn't answer his children's calls or return their messages, although she had an excellent relationship with them before his death.

Three of the children want to find out if there was a will, just on principle; the others say just forget about it. Why is she a different person now than when their father was alive? How should we proceed? -- HD via email

 

A: The siblings who want to pursue this are right that there's more than money at stake here. In families, money means love, power, and sometimes, feelings of betrayal, especially when it involves legacies from parents.

A will is a public document. Anybody can to go Surrogate's Court in the county where your late father-in-law lived and read a copy of his will after it is probated. (Probate is the legal procedure in which the court accepts a will as valid.)

But if he had left a will that was filed for probate, his children would have been notified by the court. The fact that that hasn't happened suggests that either there is no will or that it hasn't been presented for probate.

It's true that if he left no will, the state's intestacy law would divide his property between his children and his surviving spouse. But that law only applies to property that is left through a will. The intestacy law doesn't cover assets that pass outside a will, such as retirement accounts, life insurance, and jointly-owned assets. Any asset with a named beneficiary goes directly to that person. Any jointly-owned asset automatically goes to the surviving owner.

The bottom line: even if your father-in-law had no will, he could have left all his assets to his wife through beneficiary designations, joint ownership, and 'in trust for' bank accounts, says John Barnosky, a Uniondale, New York estate lawyer.

Barnosky’s advice: Go to the Count Clerk's office in the counties where the three houses owned by your late father-in-law are located, and look up the last owner of record.

 If he put the houses in a trust for his wife's benefit, for example, the trust would be listed as owner of record. But if the houses were in his name alone, the only way they can pass to a new owner is via a will or under the state intestacy law.

If there are any assets that were in his name alone, his children should file in court for an intestacy proceeding, in which the court will distribute the assets as directed by the law. As a first step, their lawyer should write a letter to his widow. It should say: "Since we haven't heard about a will, we assume there is none. We're therefore bringing an intestacy proceeding. Please send us a list of the decedent's assets." 

It may be that his formerly friendly widow is being evasive because husband transferred everything to her while he was alive, and she doesn’t know how to explain that to his children. 

If he did transfer his assets to her during his lifetime, his children can challenge the legitimacy of those transfers in Surrogate's Court. Overturning them is like overturning a will: To succeed, the children must show that the transfers were improperly executed, or that their father lacked mental capacity to understand what he was doing, or that he acted as a result of undue influence.