Ignore probate if all assets pulled out of estate?

[Ralphie]

My wife's mother recently passed away in Michigan. Before
her death, she moved nearly all of her assets into the names
of her children. This includes her condo as well as bank
accounts (she didn't have any life insurance). Essentially
everything that she had is now in the hands of her children,
as she wanted.

She had a will, leaving all of her remaining assets (of
which there are basically none) to her children in equal
parts. Since there really isn't anthing left to divy up,
none of my wife's siblings has any interest in becoming
executor of her estate. I believe that the only reamaining
tasks relate to dealing with any final taxes and
miscelaneous bills (utilities, credit cards, etc.), but no
one wants the hassle.

I have a couple questions:

1) What happens if no sibling closes out the estate?

2) If no siblings close out the estate, would anyone else
(the state of Michigan, the IRS, a credit card company,
etc.) automatically step up?

3) Since all of the assets were transferred before my
mother's death, is there any real chance that someone could
come after any of the assets? Would it matter when the
assets were transferred? Would it matter how the assets
were moved (e.g., adding a child to a bank account as a
JTWROS)?

TIA.

 

[Stuart Bronstein]

My wife's mother recently passed away in Michigan. Before
her death, she moved nearly all of her assets into the names
of her children. This includes her condo as well as bank
accounts (she didn't have any life insurance). Essentially
everything that she had is now in the hands of her children,
as she wanted.

She had a will, leaving all of her remaining assets (of
which there are basically none) to her children in equal
parts. Since there really isn't anthing left to divy up,
none of my wife's siblings has any interest in becoming
executor of her estate. I believe that the only reamaining
tasks relate to dealing with any final taxes and
miscelaneous bills (utilities, credit cards, etc.), but no
one wants the hassle.

I have a couple questions:

1) What happens if no sibling closes out the estate?

Depends on what you meant by close the estate. All property
has been distributed. The only thing that is left is to
make sure all creditors (including the IRS) are paid.

2) If no siblings close out the estate, would anyone else
(the state of Michigan, the IRS, a credit card company,
etc.) automatically step up?

I don't know if they "would." But they certainly could.
They could require the kids to gift back money and property
to the extent necessary to pay off creditors.

3) Since all of the assets were transferred before my
mother's death, is there any real chance that someone could
come after any of the assets?
Yes.

Would it matter when the assets were transferred?

It might, depending on Michigan's fraudulent transfer laws
and the statute of limitations, if any, on a creditor's
right to get back property given away without consideration.

My guess, though, is that it won't make any difference in
this case.

Would it matter how the assets were moved (e.g., adding a child
to a bank account as a JTWROS)?

No.

Stu

 

[ed]

My wife's mother recently passed away in Michigan. Before
her death, she moved nearly all of her assets into the names
of her children. This includes her condo as well as bank
accounts (she didn't have any life insurance). Essentially
everything that she had is now in the hands of her children,
as she wanted.

She had a will, leaving all of her remaining assets (of
which there are basically none) to her children in equal
parts. Since there really isn't anthing left to divy up,
none of my wife's siblings has any interest in becoming
executor of her estate. I believe that the only reamaining
tasks relate to dealing with any final taxes and
miscelaneous bills (utilities, credit cards, etc.), but no
one wants the hassle.

I have a couple questions:

1) What happens if no sibling closes out the estate?

2) If no siblings close out the estate, would anyone else
(the state of Michigan, the IRS, a credit card company,
etc.) automatically step up?

3) Since all of the assets were transferred before my
mother's death, is there any real chance that someone could
come after any of the assets? Would it matter when the
assets were transferred? Would it matter how the assets
were moved (e.g., adding a child to a bank account as a
JTWROS)?

1. Nothing. there is no *estate* to close out. From your
standpoint, a Probate is only necessary to get funds from
her name into your name. It also makes sure all the bills
are paid and the right people get the money. That's
already done, I presume their is no inheritance nor estate
tax, state or Fed.

2. If she owes anyone money you didn't pay, like the
funeral home, they will open a Probate if you don't pay
them. I strongly suggest each heir pay their share of any
depts she left.

3. Yes they could come after the assets but the rest is a
legal question.

4. By the way, the assets were transferred at her tax basis
with no step-up in basis. ed

 

[Dan Evans]

My wife's mother recently passed away in Michigan. Before
her death, she moved nearly all of her assets into the names
of her children.

1) What happens if no sibling closes out the estate?

From what you have described, there is no "estate" to "close out".

Which does not mean that there are not tax problems, as
described below.

2) If no siblings close out the estate, would anyone else
(the state of Michigan, the IRS, a credit card company,
etc.) automatically step up?

Perhaps, but not likely, since there are no assets (other
than possible claims against the siblings, but there are
other ways to deal with that).

3) Since all of the assets were transferred before my
mother's death, is there any real chance that someone could
come after any of the assets? Would it matter when the
assets were transferred? Would it matter how the assets
were moved (e.g., adding a child to a bank account as a
JTWROS)?

Both the IRS and the state of Michigan would have remedies
that they could pursue to collect money from the siblings
for taxes owed by their mother.

Credit card companies and other creditors could also bring
actions against the siblings on the grounds that the
transfers were "fraudulent" because (among other things)
they rendered the estate insolvent.

Whether there is a "real chance" these actions will be taken
depends on the amounts of the debts, the value of the
assets, and a lot of other things that can't necessarily be
predicted.

A more interesting question from my point of view is whether
the siblings are really interested in cheating the IRS,
state of Michigan, and their mother's creditors.

*Dan Evans
*Author of the Tax Protester FAQ
*http://evans-legal.com/dan/tpfaq.html

 

[Dave Woods]

My wife's mother recently passed away in Michigan. Before
her death, she moved nearly all of her assets into the names
of her children. This includes her condo as well as bank
accounts (she didn't have any life insurance). Essentially
everything that she had is now in the hands of her children,
as she wanted.

She had a will, leaving all of her remaining assets (of
which there are basically none) to her children in equal
parts. Since there really isn't anthing left to divy up,
none of my wife's siblings has any interest in becoming
executor of her estate. I believe that the only reamaining
tasks relate to dealing with any final taxes and
miscelaneous bills (utilities, credit cards, etc.), but no
one wants the hassle.

I have a couple questions:

1) What happens if no sibling closes out the estate?

2) If no siblings close out the estate, would anyone else
(the state of Michigan, the IRS, a credit card company,
etc.) automatically step up?

3) Since all of the assets were transferred before my
mother's death, is there any real chance that someone could
come after any of the assets? Would it matter when the
assets were transferred? Would it matter how the assets
were moved (e.g., adding a child to a bank account as a
JTWROS)?

Your questions should be directed to an attorney familiar
with Michigan probate law. You do not have a tax issue
here.

 

[HW \Skip\ Weldon]

Both the IRS and the state of Michigan would have remedies
that they could pursue to collect money from the siblings
for taxes owed by their mother.

Credit card companies and other creditors could also bring
actions against the siblings on the grounds that the
transfers were "fraudulent" because (among other things)
they rendered the estate insolvent.

Two questions:

1. The above assumes a fraudulent transfer. If there wasn't, and if
there were no other assets, then the creditors (government
or private) could not collect from family. Correct?

2. What if there was no fraudulent transfer, and the only
other asset was a long-standing life insurance policy owned
by the decedent or an IRA. If both were paid out to the
named beneficiary, could government or private creditors
follow and attempt collection?

-HW "Skip" Weldon
Columbia, SC

 

[rick++]

Whether there is a "real chance" these actions will be taken

depends on the amounts of the debts, the value of the
assets, and a lot of other things that can't necessarily be
predicted.

Interesting article about "zombie debt collectors" on the
news wires these days. They buy difficult-to-find debt for
pennies on the dollar and become legal collecters. This
becomes more practical for mom-and-pop operations as
national databases grow.

 

[Dan Evans]

Two questions:

1. The above assumes a fraudulent transfer. If there wasn't, and if
there were no other assets, then the creditors (government
or private) could not collect from family. Correct?

You misunderstood my use of the word "fraudulent." By
"fraudulent," I did mean that any fraud was intended, only
that the transfer fell within the Uniform Fraudulent
Transfer Act (the text of which can be found at
http://www.fraudulenttransfers.com/ufta.htm), which Act
covers transfers for which no fraud was intended.

For example, a transfer is considered to be "fraudulent"
within the meaning of section 5 of the Uniform Fraudulent
Transfer Act if the transfer renders the transferee
insolvent, regardless of whether any fraud was intended, and
even if the insolvency was unintentional.

2. What if there was no fraudulent transfer, and the only
other asset was a long-standing life insurance policy owned
by the decedent or an IRA. If both were paid out to the
named beneficiary, could government or private creditors
follow and attempt collection?

If the remaining assets were exempt from the claims of
creditors, then the transfer could be "fraudulent" even
though no fraud was intended. (See the definition of "asset"
in section 1 of the Uniform Fraudulent Transfer Act.)

*Dan Evans
*Author of the Tax Protester FAQ
*http://evans-legal.com/dan/tpfaq.html