Probate- Pennsylvania

[Tayla]

What is the name of your state (only U.S. law)? Pennsylvania.

Maternal parent passed in December of 2012. Died without a will. Seven Children. No living spouse. The heirs ( my siblings) have chosen that I be the admin/executor for the estate. I'm aware that I must file thru the courts for this appointment.
In researching her accounts, she is pretty much insolvent. She carries a minuscule checking of 600$ that is currently locked til I get approval thru the courts to transfer into an estate account. The funeral expense was 2300$ which us siblings had to pay in lieu of her untimely death. She had a small IRA ROTH (2k or there abouts) which indicated all her children were beneficiaries. The IRA is not allowing any release to the beneficiaries until probate is opened . Even then we cant really touch the funds as they have to be transferred to an inherited ROTH account. (unless probate takes it and uses it for all her debts?)
The fees to open probate will start at 110$ and then there are further fees for newspaper announcements and further filings as the system requires. Her medical insurance is auto pay so they have twice withdrawn funds after her demise . I had sent them a formal letter on December 15 with her death certificate. I have called them and they say that because claims are still coming in to pay for, that they are within their right to collect monthly payments. This takes the 600$ at time of death to close to $200 at present. I am in a perpetual loop. I have zero funds to cover these cost personally. I just want to get the legality out of the way- Any thoughts How to proceed with no funds on hand ? This is a stressfull time so any positive guidance is appreciated.

 

[ecmst12]

Um....no, they cannot collect premiums for any time after her death, no matter how many bills remain to be paid. You need to take that up the chain or contact the state department of insurance to complain about it.

 

[Tayla]

thanks for the directive.

 

[anteater]

And, if the IRA has designated beneficiaries, I would also be going up the chain of command at the custodian. If the IRA has designated beneficiaries, it is not a probate asset and should not be subject to creditor claims.

But who told you that the IRA has to be transferred to an inherited IRA? Besides, with a number of designated beneficiaries, it can not be transferred to just one inherited Roth IRA. Separate inherited Roth IRA's would need to be established for each of the children. But, there should be an option to have the funds in the account distributed to the beneficiaries. And, since it is a Roth, if it has been established for 5 years, distributions would be free from income tax - the same as if your mother had taken distributions while she was alive.

 

[Tayla]

Correct, technically after five years it can be distributed. Provided no changes were made to the account. Well there were changes in so much as how they had her "re-Invest" in other funds to keep things moving. So the Clock was reset according to their "terms of service". They are under no obligation to do anything other then offer us the 'Inherited" Roth IRA form. Yes with seven siblings, each one of us receives a form to transfer our %.

The insurance side ....still pending. They still insist that she has "open claims" and until that gets settled they cannot release the payment. The bank did send proof that the insurance is auto pay and they did not receive a formal "stop pay". So its up to my being when the judge signs the appointment to dispute this payment.

 

[tranquility]

Correct, technically after five years it can be distributed. Provided no changes were made to the account. Well there were changes in so much as how they had her "re-Invest" in other funds to keep things moving. So the Clock was reset according to their "terms of service". They are under no obligation to do anything other then offer us the 'Inherited" Roth IRA form. Yes with seven siblings, each one of us receives a form to transfer our %.

The insurance side ....still pending. They still insist that she has "open claims" and until that gets settled they cannot release the payment. The bank did send proof that the insurance is auto pay and they did not receive a formal "stop pay". So its up to my being when the judge signs the appointment to dispute this payment.

I think that if no changes were made, it MUST be distributed before five years.

 

[Tayla]

Tranquility- Prior to 5 years? Her policy doesn't state that, it clearly says After the five years have been met with no changes.

 

[tranquility]

Tranquility- Prior to 5 years? Her policy doesn't state that, it clearly says After the five years have been met with no changes.

(See also: http://www.irs.gov/publications/p590/ch02.html)

For an easier explanation, see http://fairmark.com/rothira/inherit.htm

Non-spouse beneficiary

If you inherit a Roth IRA from someone other than your spouse, you aren't permitted to make contributions to the inherited IRA or combine it with any Roth IRA you established for yourself. What's more, you have to follow the minimum distribution rules for inherited IRAs.

The distribution rules that apply to an inherited Roth IRA are the same as the ones used for traditional IRAs in a situation where death occurs before the "required beginning date" for minimum distributions. This is true without regard to the age of the Roth IRA's owner at death, because there is no "required beginning date" for distributions from Roth IRAs.

For a beneficiary other than a spouse, distributions must satisfy one of the following rules:

Rule 1: Receive the entire distribution by December 31 of the fifth year following the year of the owner's death.
Rule 2: Receive the entire distribution over your life, or over a period not extending beyond your life.

The original owner may have specified which rule applies in the document used to set up the Roth IRA. More often, the choice is left to the beneficiary. If the choice is yours, you have to choose by December 31 of the year following the year the death occurred, because that's the last day to start receiving distributions under Rule 2.

Suppose you choose Rule 1. In this case you can delay your distribution, if necessary, until the fifth year after the year the IRA was established, to avoid paying tax on distributions of earnings. You can also withdraw all amounts other than earnings before that time without paying tax or penalty. When you reach January 1 of the fifth year after the year the original owner established the Roth IRA, you can withdraw the earnings as well without any tax or penalty.

If you choose Rule 2 instead, you may be required to take some distributions before the Roth IRA has existed five years. That's okay though, because you're not considered to have withdrawn any earnings until after you withdraw all the contributions (including conversion money). The required distributions under this rule are generally a small percentage of the overall value of the Roth IRA, so you aren't likely to take any distributions of earnings within five years unless you withdraw more than the required amount.

 

[anteater]

Tranquility- Prior to 5 years? Her policy doesn't state that, it clearly says After the five years have been met with no changes.

What policy? I thought you said that it is a Roth IRA. What sort of custodian is this?


ADDED: Thank you, Tranq. Saved the time from having to write up what I was talking about with regard to 5 years.

 

[Tayla]

Its a Roth IRA thru Fidelity. So they have "terms and conditions"- Which to me means a Policy of terms and distribution. Sorry if my terminology does not match the common language in this topic.

The following mathematically makes no sense:
Rule 1: Receive the entire distribution by December 31 of the fifth year following the year of the owner's death.

Basically six years after her death?- "of the fifth year FOLLOWING the year of the owners death"

I'm grateful for the links, and appreciate the insight.

 

[anteater]

OK. I thought that possibly your mother had been sold some bizarre investment product.

I think that you are misinterpreting. Have you actually spoken with anybody at Fidelity?

Don't confuse tax-related distribution rules with what the beneficiaries can do.

 

[anteater]

The following mathematically makes no sense:
Rule 1: Receive the entire distribution by December 31 of the fifth year following the year of the owner's death.

Basically six years after her death?- "of the fifth year FOLLOWING the year of the owners death"

You are overlooking the "by" in there. It simply means that a beneficiary that does not elect to take distributions over the beneficiary's lifetime must take a complete distribution by December 31 of the fifth year following the year of the owner's death. It does not mean that the beneficiary has to wait until then. The beneficiary can take a complete distribution at any time. Or a series of distributions. Just as long as the account is fully distributed by that time - once again, if the beneficiary does not choose Rule #2, distribution over the beneficiary's lifetime.

 

[Tayla]

Yes, I am overthinking and need to re-read ALOT ...stress.

Thanks for the laugh on the use of 'Bizarre' investment. To me it is BIZARRE when I read thru all the pages and stipulations....Probate needs to be simplified for those that have very limited assets and just need to clear up some lose ends. It really should not be this complicated to finalize when she had no real estate or other major portfolio to contend with. But Good Ole Commonwealth of PA is notorious for baffling folks with even the simplest of tasks.

And yes I actually spoke with Fidelity. They wont go into detail UNTIL my siblings and I fill out the 12 pages ( yes 12 pages ) of information to transfer the funds to NEW established accounts. They will not cut checks, they will only allow new accounts to switch over. I say, why establish these accounts when all we want is to be rid of this roadblock and move on. Saves them from all the additional work of splitting out and re-establishing and we can each just do a claims on the percentage due. Is that so hard to simply do that?

 

[anteater]

Thanks for the laugh on the use of 'Bizarre' investment. To me it is BIZARRE when I read thru all the pages and stipulations....Probate needs to be simplified for those that have very limited assets and just need to clear up some lose ends. It really should not be this complicated to finalize when she had no real estate or other major portfolio to contend with. But Good Ole Commonwealth of PA is notorious for baffling folks with even the simplest of tasks.

Actually, probate in PA is fairly simple when compared with other states. In most cases, the court exercises little oversight.

You might consider trying to use the small estate process that is available for estates valued at less than $25,000. It is not as simple as small estate procedure in other states. And there still are court fees. But you get away from the inventory, accounting, etc. that a "full" probate entails. If possible, visit the Register of Wills. Depending upon workload, the personnel there may give you some guidance.

 

[Tayla]

Thank you Anteater, you have given more clarity to this matter.

Our courthouse has signs posted in every corner- No "advice" from staff or "directives on form filing" will be given. A library is available on the Second floor for research.

Onwards to getting things resolved. Thanks to each for the assistance and clarification.