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Discussing Finances And Wills With Young Adult Children

Discussion in 'Miscellaneous in Parenting' started by Laks09, Jan 20, 2021.

  1. Laks09

    Laks09 Staff Member Finest Post Winner

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    Question - why make the RTL while you are alive? For example, in TX and some other states, the creation of trusts for minor kids can be a directive in the will after both parents pass away. If the kids are no longer X years then they have more flexibility without putting everything in a trust right? Is there a specific reason for an RTL? Almost all TX lawyers suggest a will, living will and trust creation directive in the Will. The only person I know who has an RTL is one who told me she doesn’t want the spouse to inherit her assets and that she wanted it to go to the kids specifically. With an RTL won’t the surviving spouse have a problem with its inflexible nature?
     
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  2. Hopikrishnan

    Hopikrishnan Gold IL'ite

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  3. Laks09

    Laks09 Staff Member Finest Post Winner

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    what if someone doesn’t file FBAR? Do the inheriting children have to pay FBAR penalty also?

    I think barring unforeseen circumstances, it’s better to move all assets to the US before it’s too late.

    Wills in India don’t account for repatriating the funds into US trusts. It will be the guardian’s job to do this.
     
  4. Hopikrishnan

    Hopikrishnan Gold IL'ite

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    Your questions made me wonder if clicking the link produces the full essay on screen. It doesn't !!
    Here is the info' from that link <copy pasted> :
    Do Estates File FBAR?
    Do Estates File FBAR: Yes, estates do file FBAR (if they meet the requirement). When it comes to international tax and foreign account compliance, one of the most crucial aspects of the annual filing requirements is the FBAR. The FBAR is an electronic foreign bank and financial account form otherwise known as FinCEN Form 114. Nearly all U.S. persons with foreign accounts must file the FBAR, and there are not many exceptions to the requirements for filing.

    The FBAR form can be very intimidating, if for no other reason than because the penalties associated with not filing the form timely or correctly can be staggering.

    Who has to File the FBAR?
    If you are a U.S. person with foreign accounts, you will most likely have an FBAR reporting requirement.

    For example, minor children are required to file the form. For Foreign Nationals who are now U.S. persons but opened a foreign account before (or after) becoming a U.S. person, they also have to report all of their foreign accounts on the FBAR.

    Even employees who have signature authority over accounts must also file the FBAR.

    Deceased Person & Estate FBAR Filing
    Estate and FBAR filing has several components to it.

    For example, let’s say Rachel was a U.S. person who recently passed away.

    Common questions Rachel’s estate may have, include:

    • Did Rachel have to file the FBAR in prior years?
    • If so, did she file it in prior years?
    • Are there now estate accounts that need to be reported on the FBAR?
    • Is the current estate administrator also a beneficiary on the account?
    • Was the beneficiary knowingly placed on the account in prior years?
    • Was the decedent’s final tax return filed?
    • Does the beneficiary have to file FBAR?
    Let’s go through these Estate FBAR questions:

    Do Estates File FBAR?
    Yes, estates file an annual FBAR if the threshold requirement for reporting is met.

    As provided by the IRS:

    “A United States person, including a citizen, resident, corporation, partnership, limited liability company, trust and estate, must file an FBAR…”

    Did the Decedent File FBAR in Prior Years?
    The first question to consider is whether the decedent had an FBAR requirement in prior years.

    If the decedent had FBAR requirement in prior years, then the administrator must determine whether or not FBARs were properly filed.

    If the FBARs were filed, then that is good news and the administrator can file the decedent’s last tax return, along with any subsequent estate FBAR.

    If the decedent did not file the FBAR in prior years (and was previously required to file the form), then the administrator should pause before moving forward with filing additional tax returns for the estate — or the decedents’ final tax return.

    Personal Accounts Transferred into Estate Name
    After a person passes away — depending on how the probate works in the particular state at issue — the accounts will transfer into the name of the estate. As a result, the accounts that were previously held in the name of the decedent are now held in the name of the estate — and must be reported on the FBAR (and possibly 8938) by the estate.

    It is important that the administrator files the forms correctly, since the IRS has issued penalties (which courts have confirmed) against the administrator of the estate when the administrator is also a beneficiary — such as a child of the decedent.

    Is the Estate Administrator Listed on the Account?
    Here is a very common situation: A parent passes away and leaves all of their money and assets to their children. A few years before the decedent passed away, they listed one of their children as a joint owner or signatory on the account.

    This is usually done when an elderly person or a terminally ill person is concerned about having someone they trust being able to access the money.

    In these types of situations, it is not uncommon that the decedent does not tell their adult child that they have been placed on the parent’s account, out of fear that the child may access the money for their own use.

    Therefore, it is not until after the parent passes away that the child learns that they have been listed on the account for the past several years.

    *This will usually result in the child needing to submit their own amnesty disclosure to the IRS.

    Was the Decedent’s Final Tax Return already filed?
    If the decedent’s final tax return has not been filed at the time the administrator learns of the foreign accounts (and presuming they were not correctly disclosed in prior years), the administrator should wait before filing the decedent’s last tax return and/or any estate tax returns (if time allows).

    Rather, the administrator should apply for an extension and take the time to get their ducks in a row first. This way, the estate can properly disclose all of the accounts and assets through one of the offshore amnesty programs.

    Does the Beneficiary Now have to file FBAR?
    When a U.S. person beneficiary inherits a foreign account, the beneficiary may now have their own personal FBAR filing requirement as well.

    The most important thing for taxpayers to keep in mind is – simply because a person passes away does not absolve that person’s FBAR filing requirement and may create an FBAR reporting requirement for the estate and/or beneficiaries.
     
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  5. Laks09

    Laks09 Staff Member Finest Post Winner

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    I didn’t understand this properly I guess. Someone has to file before kids get it? Which administrator? The foreign accounts don’t fall under US wills/trusts right? The administrator for the will in India? Why will they pause something because those are US taxes and don’t pertain to an asset in India? Wont the kid inherit it and then have to pay FBAR penalty etc?
     
  6. Hopikrishnan

    Hopikrishnan Gold IL'ite

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    FinCEN114-- this is the form we electronically file each year, if the tax-filer's foreign financial accounts total is above $10K. When Rachel died during 2020, Rachel's form FinCEN114 for that tax year has to be filed (if she had more than $10K) on or before the tax filing deadline, usually April 15, 2021. This is to be done by the Estate Administrator (also called Executor, also called Personal Representative, or some other name in various will documents). If dead-Rachel is filing Tax Return for 2020 Jointly with alive-husband, then the husband will file that FinCEN form for Rachel. If Rachel's foreign accounts are distributed away in the year of her death, [magic of joint accounts!!] then no more FinCEN for her after this last one. But if that is not the case, and the foreign accounts will linger in her estate, until distributed by order of the probate court, annual misery for Rachel's estate-admin/exec/PR/Husband... in filing FinCEN form each year until the account balance falls below $10K.

    Think of IRS, the taxing authority, as a separate entity from a Probate Court. Then things would be clear.

    The job of the Probate Court is to bless the bona fides of the will/trust thing, have a look at the list of world wide properties, debts of the estate, and authorize the Admin/Exec/PR or whomever to pay debts, and distribute the net-assets according to instructions laid out in the will. Typical wills will have standard language to say how foreign-assets, and assets assigned to survivors through joint ownerships and TOD designations are not part of that specific country's probate process. Some dead people will have stuff in a handful of countries, and a sitius-will (local will) in each place. The Properties-List submitted to each probate in each of those countries will all be the same. This probably half-way answers your question..."The foreign accounts don’t fall under US wills/trusts right?"

    IRS wants to know if the Estate is valued below, at or above the federal estate-tax exemption amount ( 11.5 M$ I think; it increases every year). This is World Wide Estate -- everything that is mentioned in all the wills and trusts everywhere in the world as wholly or partly belonging to Rachel. If the total is below the exemption, no need for additional paperwork (form 706, Estate Tax Return) - homework reading!! India does not have any estate taxes. However, if Rachel had money in a country that levies estate taxes, there would be tax-credits if that country has a tax treaty with USA.
     
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  7. Hopikrishnan

    Hopikrishnan Gold IL'ite

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    Leaving the simplest feasible process for transfer of wealth to the beneficiary should be the goal. Foreign assets are a pain, more so if the assets cannot be electronically moved out while sitting in USA.
    Sometimes local relatives help out. I have heard stories of NRI's sending installments of money home to someone (usually Daddy) with the PoA to invest in real-estate, only to find out after 10 or so years that the invested real-estate are all registered in the names of Daddy and all other local siblings and cousins. The locals would glow with health and wealth, while the visiting NRI, coming to see the accumulated wealth, would look tired and shabby.
    So True.
    Spending down foreign assets, to zero, if that is feasible, is a good thing one can do for foreign-born beneficiaries.
     
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  8. Laks09

    Laks09 Staff Member Finest Post Winner

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    Thank you for explaining this. Now I get it. So many complications in having assets outside the country.
    I know. This has been in the back of our minds but we have to seriously look into this.

    I also know of people who don’t make a will in India. It’s better to have one in each country according to lawyer friends.


    I think this is the best option for those of us whose kids won’t go back. What’s the point in holding onto things and making it difficult for the children. At some point assets turn into liabilities and we need to start thinking practically.
     
  9. Laks09

    Laks09 Staff Member Finest Post Winner

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    Another question. I know, I have a zillion questions. How much of emergency cash are we talking about? A couple of months worth? I never keep any cash anywhere and I need to get on this.
     
  10. Hopikrishnan

    Hopikrishnan Gold IL'ite

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    :roflmao:You are serious, aren't you? If you are, you can rest assured that some of these (family/situation specific) answers would fall out of your "fire drill".
     

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