Where’s the Check for My Inheritance?

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The checks for your inheritance may come in partial payments over many months, be tied up for years in a trust, or come within weeks. Or, there may be nothing left for you to inherit.

Much of the timing of the disbursement of your inheritance depends on the type and value of the deceased’s assets, the creditor claims against those assets, whether probate is required, and whether the deceased wanted your inheritance to be distributed outright to you or tied up in a trust for some period of time.

Assets with beneficiary designations trump whatever the deceased’s will or trust states.  For example, if the will or trust state that the deceased’s assets are to be divided equally between you and a sibling, but the life insurance beneficiary designation only names your sibling, your sibling will get all of the life insurance proceeds.

Life insurance payouts to the designated beneficiaries typically come pretty quickly after the beneficiaries submit the deceased’s death certificate and paperwork required by the insurer. Note, however, that beneficiaries of retirement assets should first consult with a financial advisor before claiming retirement benefits so as to determine a withdrawal rate that will minimize tax consequences.

Also on a fairly fast track for distribution are assets jointly owned with the deceased, and assets of the deceased that were held in payable-on-death (P.O.D.) or transfer-on-death (T.O.D.) accounts at banks or investment firms. These assets can typically be transferred to the surviving joint holder or to the persons named on the P.O.D. and T.O.D. accounts with minimal paperwork and time.

Stated another way, jointly held assets, P.O.D. and T.O.D. accounts, and assets with beneficiary designations are not impacted by the will or trust of the deceased. Most other assets will be impacted by the will or trust.

The personal representative of the will and the trustee of the trust have many duties to perform before writing checks to the beneficiaries. Importantly, the personal representative and trustee will want to be certain that there is sufficient money to cover any obligations of the deceased before writing out checks to the deceased’s beneficiaries. When confidence is high that there are ample assets, they may distribute some inheritance checks as initial partial payments of the expected inheritance.

Debts, taxes and expenses of the deceased must be paid first. When estate tax returns are necessary, the return is due nine months after the deceased’s death, or the return may be filed even later if an extension is granted. Moreover, the personal representative or trustee will usually not make a final distribution of inheritance checks until the IRS has officially okayed the tax return. IRS approval could take several months after the return is filed.

The personal representative has authority over assets in the estate. However, the personal representative nominated in the deceased’s will doesn’t have any authority to act in that capacity until the court has accepted that nomination. Getting a probate started in court, so that the court can accept the nomination of the personal representative, could take a couple of months after the death.

The trustee is authorized to administer the assets of the trust without waiting for court acceptance of his or her appointment as trustee. The trustee’s authority is limited to assets in the trust.

Assets must be gathered, inventoried and appraised, whether the assets are governed by the will or trust. Creditors of the estate must be officially notified of the death. In Minnesota, creditors have a four month window after publication of a legal notice of the death to file any claims against the probate estate.

Some assets may need to be sold to turn the illiquid asset into cash. Moreover, if the deceased owned real estate in another state, then a probate proceeding may also need to be started in that state. Each of these duties takes time. Of course, substantial additional time could be incurred if a dispute erupts among the beneficiaries. Even without a dispute, probate frequently takes a year or more.

If the estate is insolvent — meaning that there aren’t enough assets in the estate to pay all of the deceased’s debts — then the beneficiaries may get nothing (with exceptions under Minnesota law for spouses and children for certain assets).

If the deceased stated in his or her trust or will that a certain number of dollars is given to specified individuals or organizations, then that money will be dispersed “off the top” before any other checks are written (other than to pay debts and expenses). Thus, beneficiaries intended by the deceased to split the remainder of the assets after debts, expenses, and the specific gifts, could end up with nothing.

Trust assets will be distributed according to the wishes of the deceased, as expressed in the trust document. The trust may state that beneficiaries are to receive their share outright, or over time.

Personal representatives and trustees typically work with a lawyer who has experience settling estates and administering trusts, and that experience may enable inheritance checks to be distributed more quickly. The lawyer typically represents the personal representative and/or trustee in his or her capacity as personal representative and/or trustee, and does not represent the beneficiaries. If a dispute erupts, the beneficiary would typically hire his or her own lawyer.

©2016 Wittenburg Law Office, PLLC. All rights reserved.

Disclaimer: This Blog is for informational purposes only and is not to be construed as legal advice. If you have questions, please seek the advice of an attorney licensed to practice law in the state where you live. Wittenburg Law does not expressly or implicitly warrant the accuracy or reliability of any of the Blog’s contents. An attorney-client relationship is not formed by reading this Blog. If you are interested in Wittenburg Law’s representation of you, you must contact Wittenburg Law for a determination of whether your matter is one for which Wittenburg Law is willing and able to accept representation of you.

Bonnie Wittenburg, Wittenburg Law Office, PLLC, 601 Carlson Parkway, Suite 1050, Minnetonka, MN 55305         952-649-9771     bonnie@bwittenburglaw.com   www.bwittenburglaw.com