“My father remarried at the age of 65. He kept his house in the revocable trust where he had control of his assets.”
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When we sold our late mother’s house last year for $600,000, the equity was supposed to be divided equally by us four siblings (around $146,000 each). In 1996, I borrowed $20,000 from my mother interest-free to help buy my condo. I promised to pay her back in two years.
I managed to pay her back $5,000 in six months. But I made terrible decisions in my finances and I lost my high-paying job. My budget couldn’t afford to pay her back. I was terrified to tell her. She was extremely angry at that time, so she deducted $20,000 from my inheritance.
Long story short: I defaulted on mom’s loan. When mom made out her will, she produced my letter from 1996, which stated that I did not repay the loan. This is the only evidence of the transaction. I want to have the CPA redo the taxes to show that I paid part of the loan off.
When I called my sister, mom’s power of attorney, she was so upset. She said, “F— you, never talk to me again!” I was shocked! She has never talked to me this way in 75 years. I understand her anger because this is a mess and she’s a hero for doing such a wonderful job as a power of attorney.
I too am upset, but I need every cent of my inheritance. I live in a semi-expensive assisted living facility, and I’m not in good health. On top of that, Medicare only pays part of my health bills. Do you have any suggestions on how to fix this mess, without having to redo our taxes for 2022?
Cash-Strapped Son
Related: ‘Our American dream turned into a nightmare’: I sold my home, but rising interest rates and prices have locked me out of the market. What can I do?
“Your mother lent you this money almost 30 years ago, but did not record it on her tax return, and as such it is most likely considered a gift by the Internal Revenue Service.”
MarketWatch illustration
Dear Cash-Strapped,
You’re digging a dry well.
I’m sorry that you lost your job during your peak earning years. But given the timeline involved, it’s hard to accept that you could not have repaid your mother $15,000 over 28 years. It’s time to get real and acknowledge your part in this family drama. This loan should have been a priority for your budget. If you gave your mother $50 a month over that period, the loan would have been paid before she died.
Your mother lent you this money almost 30 years ago, but did not record it on her tax return, and as such it is most likely considered a gift by the Internal Revenue Service. In 1996, the annual gift tax exclusion was $10,000, so your mother effectively gifted you twice the eligible amount. Given that your mother passed away last year, it seems like that boat has sailed.
If you wish to amend your mother’s 2022 tax return, it’s years too late. And if you think that amending your mother’s return will restore your full $146,000 inheritance, you’re sadly mistaken. She appears to have left a will stating that she wanted $20,000 deducted from your inheritance. You can’t undo that by adjusting your or your mother’s tax returns.
Gift versus personal loan
From what you write in your letter, it seems like your mother effectively gifted you this money, at least in the eyes of the IRS. “When someone lends you money and doesn’t charge you interest, or charges a below-market rate compared to the IRS’s current applicable federal rate, the IRS might consider the loan a gift or require them to pay income taxes on imputed interest,” Experian
EXPGY,
says.
If this was an official loan, however, the IRS requires a bad-debt statement, explaining the details. “You must deduct a bad debt in the year it becomes worthless. If you realize you could have reported and taken a deduction for an unpaid debt years ago but didn’t, you generally have only three years to amend your return in order to claim it on your tax return,” according to TurboTax
INTU,
Even in that situation, your mother would likely not have been able to deduct a bad debt from your unpaid loan. “It’s a short-term capital loss, so you must first deduct it from any short-term capital gains you have before deducting it from long-term capital gains,” TurboTax adds. “You can deduct up to $3,000 of any remaining balance from other income.” But that’s all water under the bridge now.
A decade-long drama
Rather than think about what you are owed, look at it from your family’s perspective. You are the one who defaulted on a loan and a promise. That $20,000 would be equivalent to nearly $30,000 in purchasing power in 2024 — and that doesn’t account for the equity your mother “invested” in your home, which likely appreciated by the time you sold it. No one has done you a bad turn: not your sister and certainly not your mother.
Perhaps your sister is frustrated that years after this loan went unpaid, you are attempting to cause her more work by recording this $5,000. That amount is chump change in the larger scheme of your inheritance. Your mother helped you out financially when you were buying your condo. Don’t turn this good deed into a three decade-long drama. You know that you paid off part of the loan. You don’t need that recorded by the IRS.
Your sister is probably less annoyed by the fact that you did not repay the rest of the $20,000 loan, and more frustrated by the fact that you are trying to turn a bad debt dating back to 1996 into a payday in the wake of your mother’s death. It’s a hard story to sell that it’s not fair you missed out on $5,000 in your mother’s will when you failed to repay $15,000.
Focus on what you do have in your life, and make amends to your sister.
You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com, and follow Quentin Fottrell on X, the platform formerly known as Twitter.
The Moneyist regrets he cannot reply to questions individually.
Previous columns by Quentin Fottrell:
‘I don’t want my wife to lose everything’: I’ve been diagnosed with dementia — I suddenly could not spell or write legibly
‘Things have not been easy’: My sister is a hoarder and procrastinator. She is delaying probate of our parents’ estate. What can I do?
‘I gave up a job that I loved passionately’: My husband secretly set up a trust that includes our home and his investments. What should I do?
Check out the Moneyist private Facebook group, where we look for answers to life’s thorniest money issues. Post your questions, or weigh in on the latest Moneyist columns.
By emailing your questions to the Moneyist or posting your dilemmas on the Moneyist Facebook group, you agree to have them published anonymously on MarketWatch.
By submitting your story to Dow Jones & Co., the publisher of MarketWatch, you understand and agree that we may use your story, or versions of it, in all media and platforms, including via third parties.
Imprisoned Russian opposition politician Alexei Navalny has died, Russian state news agency Tass reported on Friday, citing the prison service of the Yamalo-Nenets region where he had been serving his sentence.
The prison service reportedly said the cause of Navalny’s death was still to be established.
Alexey Navalny’s spokesperson, Kira Yarmysh said in a Google-translated update on the X social media platform that “We don’t have any confirmation of this yet. Alexey’s lawyer is now flying to Kharp. As soon as we have any information, we will report it.”
CNBC could not independently verify the report.
Navalny, 47, was an anti-corruption campaigner and one of Russian President Vladimir Putin’s most vocal critics. He was serving a 19-year jail term on charges of extremism.
Navalny “felt unwell after a walk, almost immediately losing consciousness,” Interfax reported, citing a statement from the office for the prison service of the Yamalo-Nenets region.
The statement said “all the necessary resuscitation measures were carried out, but did not yield positive results.” It added that an ambulance was called and emergency doctors later confirmed Navalny’s death.
The Investigative Department of the Investigative Committee of Russia for the Yamalo-Nenets Autonomous Okrug region said Friday on Telegram that it is organizing a procedural check into the death of Navalny, according to a Google-translated post.
Russian opposition leader Alexei Navalny is seen on a screen via video link from the IK-2 corrective penal colony in Pokrov before a court hearing to consider an appeal against his prison sentence, in Moscow, Russia May 17, 2022.
Evgenia Novozhenina | Reuters
Navalny, who previously condemned Russia’s full-scale invasion of Ukraine as “the most stupid and senseless war of the 21st century,” was moved to an Arctic penal colony late last year. It is widely considered to be one of the country’s toughest prisons.
Navalny has been held behind bars in Russia since 2021, after spending nearly half a year in Germany recovering from a nerve agent poisoning in August 2020.
The German government said in September 2020 that Navalny had been poisoned by a chemical nerve agent, saying a toxicology report provided “unequivocal evidence.” The nerve agent was in the family of Novichok, which was developed by the Soviet Union. Toxicology tests conducted in France and Sweden also came to the same conclusion.
The Kremlin has repeatedly denied any role in Navalny’s poisoning.
Navalny was a well-known figure in Russia and produced numerous reports on corruption that had flourished during Putin’s leadership. Famously, Putin has a long-running tradition of refusing to mention Navalny by name in public — a decision the Kremlin has previously said stems from the president’s views of the critic.
Navalny had sought to challenge Putin for Russia’s presidency, but was barred from running against him in 2018. Putin will run for president once again next month in an election where he faces only token opposition.
World leaders react
World leaders responded to the news of Navalny’s reported death by paying tribute to his courage as an anti-corruption activist and offering their condolences to his family.
NATO chief Jens Stoltenberg said he was “deeply saddened and disturbed” by the reports, while German Chancellor Olaf Scholz expressed he was “very sad.” U.K. Prime Minister Rishi Sunak called news of Navalny’s death “terrible.”
Other high-profile figures raised questions over the circumstances of Navalny’s death.
In response to the comments from political leaders on Navalny’s reported death, Russian Foreign Ministry spokesperson Maria Zakharova said via X, “The instant reaction of NATO leaders to the news of Alexey Navalny’s demise in the form of direct accusations vs Russia is self-exposing.”
She added, “No forensic medical examination data IS available, yet the West has already voiced its ‘conclusions.'”
My father, 75, died without a will. At the time, he was divorced from his fifth wife and had a fiancée. He left behind three children: Me, the oldest at 57, from his first marriage, and a son and daughter, 29 and 32, from his fifth marriage. He was quite well off, being part owner of a business — at least, a “minor” multimillionaire.
However, his fiancée would only give us some of his possessions, and his three cars at the time of his death. She wouldn’t give us any of his legal and financial paperwork. We are pretty sure he didn’t have a will, but we believe he had a life-insurance policy, a 401(k) plan, and other investments. His fiancée swears that she is the beneficiary of his life insurance, but she hasn’t produced any proof.
We have had his mail forwarded to my brother to try and find out who his lawyer is or insurance company is or any paperwork regarding his personal business.
I have several questions:
1. How do we go about finding out if he had life insurance or a will without any paper trail?
2. How do we find out about his checking and savings accounts, and 401(k) without paperwork?
3. We do believe he died intestate and that his assets will have to go through probate court; however, my half brother has taken control of the situation, including having him cremated and sent to him for burial. He gets along great with his sister, but since I’m 25 years older and from the first marriage we were never close, and I feel like they’re “teaming up” with their mother (his most recent ex-wife) to take things from his estate, and not letting me know what’s going on.
My other questions:
4. How do we get to the point of his estate going through probate and how is a third party appointed to oversee that? Can my brother legally just take over? I want to make sure his estate is split evenly between the three of us, and I don’t know how to make that happen when my half brother won’t even communicate with me and my half-sister keeps telling me “he’s handling it.”
5. Also, if he and my sister are listed as beneficiaries on any life insurance policies or 401(k) policy, do I have a legal right to any of it if I’m not listed?
Thank you in advance for your help.
The Eldest Son
Also see: I want to blow the whistle on my former employer’s ‘shady practices,’ but I signed an nondisclosure agreement. Can I break my NDA?
“All of his possessions, everything from his wristwatch to his car and home, should go through probate when an administrator is appointed by the surrogate’s court or county courthouse.”
MarketWatch illustration
Dear Eldest,
Your late father’s fiancée has the most to lose, which is why she is likely using this time to batten down the hatches with an information blackout. All of his possessions, everything from his wristwatch to his car and home, should go through probate when an administrator is appointed by the surrogate’s court or county courthouse. You should be able to apply to be the administrator of your father’s estate. It’s a lot of work, and even includes filing his taxes.
With that said, I can answer your last two questions (No. 4 and 5) first. No, you don’t have any legal right to your father’s life-insurance policy or 401(k) plan, assuming that they do indeed exist and have your siblings (or anyone else, for that matter) listed as beneficiaries. If there are no listed beneficiaries, these accounts would become part of your father’s overall estate, and go through probate with his bank accounts, house, pension and all his other assets.
Your father’s bank account, broker and lawyer should be able to start the fact-finding process. It’s a good lesson for everyone to get their paperwork in order, and leave a copy in a safe deposit box and/or with a trusted lawyer. Assuming your father died intestate — without a will — his fiancée is not a legal heir and, therefore, would walk away with nothing, unless she was a co-owner of his bank account or listed as a beneficiary on his other accounts.
However, any 11th-hour changes to your father’s listed beneficiaries could raise a red flag. Typically, a person must be of sound mind and not under or subject to duress, restraint, fraud or undue influence to sign a will, a power of attorney document, or other legal and financial documents. A person must understand what they are signing, and have testamentary capacity — that is, he would need to know what he was signing and why, and how much was at stake.
After a person is appointed by the court to speak for the estate, you can then identify insurance payments through transactions on his bank account, and file for a change of address for all of your father’s mail, says Hubert Klein, partner and forensic accountant at EisnerAmper. As for your half brother and sister, Klein says, “What authority did he have to rush the process? Was he [or she] appointed the executor or administrator? You need to ask.”
State law controls the probate process. “Many states have this information online on how the process works — who can file paperwork, who can be appointed as the estate representative, and who can effectuate transactions on behalf of the estate,” he says. “Hidden or non-disclosed assets and accounts can be found, but someone has to speak for the estate in order ensure a proper accounting of all the estate’s assets, and that liabilities are documented for the court.”
The probate process is public, the legal equivalent of washing your dirty linen in the front yard; that will leave little room for siblings or ex-wives or fiancées to muddy the waters. In addition to an administrator/executor, you will need a trust and estate attorney to navigate the process. No one has the right to hijack this process, and the sooner you embark on a fact-finding mission with the help of your father’s bank, and the legal wheels start turning, the better.
More from Quentin Fottrell:
My father has dementia and ‘forgave’ my brother’s $200,000 house loan. The nursing-home notary said he was of sound mind. What can we do?
My husband bought our house with an inheritance. I signed a quitclaim. He said I could live there after he dies, but changed his mind. What now?
Low-paying jobs are the economy’s way of saying you should get a better job’: I’ve decided to stop tipping, except at restaurants. Am I wrong?
You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com, and follow Quentin Fottrell on X, the platform formerly known as Twitter. The Moneyist regrets he cannot reply to questions individually.
Check out the Moneyist private Facebook group, where we look for answers to life’s thorniest money issues. Readers write to me with all sorts of dilemmas. Post your questions, or weigh in on the latest Moneyist columns.
By emailing your questions to the Moneyist or posting your dilemmas on the Moneyist Facebook group, you agree to have them published anonymously on MarketWatch.
By submitting your story to Dow Jones & Co., the publisher of MarketWatch, you understand and agree that we may use your story, or versions of it, in all media and platforms, including via third parties.
For many of us, early in our domestic relationships, one partner stepped up to take the lead on handling the family finances. There is comfort, almost relief, in not thinking about it and knowing that a trusted loved one will “take care of it.”
At least it’s a relief until, as described by a recent widow, the money-managing partner dies and the survivor finds that everything is on autopay and linked to credit cards with the late partner as the primary account holder. “Now he has died, and I’m locked out of all accounts,” she says.
Another woman says the problem can cut both ways: “If I die,” she says, “he won’t know the first thing about our finances.”
UBS Global Wealth Management
UBS,
says this is not unusual, especially for older women. While women tend to live longer than men, their male partner often handles their finances.
Suze Orman, a popular financial adviser with a podcast called “Women & Money,” puts it bluntly: “I don’t care if your spouse is the best/smartest financial whiz. Every woman, single or attached, owes it to herself to be financially smart.”
At the worst of times, when consumed with grief, spouses are faced with the realization that they are now responsible for all things financial. Sadly, they find themselves in a tangled mess that could have been avoided if they had talked about money early and often.
See: How to give your heirs quick access to your bank accounts when you die
Not knowing essential information about their money and finances may open them to significant risk. It’s no surprise that so many older adults find themselves in danger of financial losses, expensive legal complications or confusing tax situations, not to mention fraudsters that invade digital accounts and assets.
Sharon Olson, president of Olson Wealth Group in Bloomington, Minnesota, a recognized leader in women’s wealth, suggests partners conduct at least two meetings a year to have the “talk” about family financial information. One or more might include a professional money manager to keep things focused.
“The best times for these family meetings,” according to Olson, “are mid-April, right after preparing details for tax purposes, and mid-October, allowing for a review before the end of the year. This is an important time to review balances on all accounts, update passwords, credit card numbers, location of important documents, and names of all advisers.
“Maintaining a current understanding of your financial details, even if your partner has taken the lead, will empower you to remain more confident in the event of a situation that forces you to take over this role,” she added.
Plus: What’s the best way to leave your house to your heirs?
Do you need a talk? Yes.
When I raise the issue of the “talk” with my friends, they perk up with great interest. You can almost see them trying to recall whether they need a “talk,” not just with their partner but also with their estate planning attorney and banker.
“Meeting with an estate planning attorney about your accounts and your intentions, as well as a banker will help you understand how your accounts are titled currently and can help you properly set them up given your estate planning documents,” says Kate Kelly, regional president of PNC Financial Group
PNC,
“Bankers can further help by being named executor and successor trustee to administer the assets during incapacity and settle the estate after death.”
“Estate planning is a necessary part of a couple’s financial picture,” explains Julian Zebot, partner and chair of the trust and estate litigation practice group at the Maslon law firm in Minneapolis. “But getting documents prepared and updated is not enough. Couples young and old can be left in the lurch if they don’t know what accounts exist, where they are and how to access them.”
Imagine one of my friend’s awakenings after a “talk” with her husband and their banker. She learned that her successful business of 40 years used her husband’s business checking account, which was in his name only. Luckily, it wasn’t too late, although it took two hours with a banker to sort things out.
Read: Is an inherited IRA the best option when a spouse dies?
Olson takes the “talk” even further. “Act like your bank,” she says. “Make sure you understand the balances and values of all your investments and assets, the names and contact details for outside advisers, bank account details and passwords, credit card numbers, phone numbers, passwords, wills, trusts and the beneficiaries — all good starts to untangling your estate.”
Kelly suggests reviewing a consolidated physical binder, or as I call it, my Red Folder. “It should contain estate planning documents, a list of assets, account statements, and a ‘here’s where we hid stuff’ list in a location known by you and your significant other or other family members,” she said.
“These don’t need to be hard conversations,” continues Zebot. “Transparency goes a long way if done sooner rather than later because the later date may never happen.”
Sorting out finances that you know little about can cause a lot of emotional stress. “How many times a day do I have to say, ‘my husband just died’ as I explain that I need assistance from a credit card holder or banker?” my widowed friend asks. The stress is compounded when bank workers, after telling her she needs to present more documents, sign off calls by saying, “Have a nice day.”
Taking the pre-emptive step to conduct the “talk” about money and making it a regular occurrence with your partner demonstrates caring and concern for the near-term, long-term and unexpected aspects of life.
Myrna Marofsky is an entrepreneur, consultant, mother, and grandmother. Having previously written two business books, it was her husband’s dementia diagnosis that led her down a new path that resulted in her writing a memoir called “To The Last Dance, A Partner’s Story of Living and Loving Through Dementia.” She frequently speaks to audiences encouraging them to redefine “caregiving” to Care-Living. Myrna is a Chapter Chair for the Women Presidents Organization, where she facilitates peer groups of women business owners.
This article is reprinted by permission from NextAvenue.org, ©2023 Twin Cities Public Television, Inc. All rights reserved.
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