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Advice & More February 2013

Legal Ease

Dividing Up Estate Assets – Some Easy Steps, Some Complicated Ones

By Jonathan J. David

There is one other complicating factor that you need to consider when dividing the assets between you and your sisters. Because you now legally own those assets and as a result are not legally required to share them with anyone, your dividing those assets with your sisters will be deemed to be a gift from you to each of them of a one-third interest in those assets.

Dear Jonathan: My father recently passed away. A few months before he died, he put my name on his assets, which basically consisted of his home and a few bank accounts. He also named me as the beneficiary on a modest life insurance policy he owned. He told me he was doing this so that we wouldn’t have to worry about probate and he made me promise that when he passed away that I would split up everything in equal shares between me and my two sisters. Even though he didn’t leave a last will and testament, I plan on honoring his wishes. My question is how do I do this, especially with the home? Do I need to get anyone’s approval or talk to anyone before I divide everything up?

Jonathan Says: First of all, just so that you know, even if your father had left a last will and testament, it would not have any effect on his retitling of his assets in both his name and your name. In other words, by putting your name on the title to those assets, he made you a co-owner of those assets during his lifetime and the sole owner of those assets upon his death, and his having a last will and testament would not have changed that, even if he had named someone other than you as a beneficiary of those assets.

As for your question as to how to go about dividing the assets between you and your sisters, regarding the bank accounts, you could simply close those out after any and all checks that were written against those accounts have cleared, and then divide the money three ways.

As for the life insurance proceeds, you first have to apply for those proceeds and provide the life insurance company with a certified copy of your father’s death certificate. Once the proceeds have been distributed to you as the beneficiary, you can then divide them three ways between you and your sisters.

The home is a bit more complicated. What is your intention regarding the home? Do you plan on selling it or do you plan on retaining ownership? If you plan on selling the home, then once you sell it, you could then divide the proceeds received from the sale three ways. If you plan on retaining it, then you would need to retitle the home in your name and your sisters’ names as tenants in common.

There is one other complicating factor that you need to consider when dividing the assets between you and your sisters. Because you now legally own those assets and as a result are not legally required to share them with anyone, your dividing those assets with your sisters will be deemed to be a gift from you to each of them of a one-third interest in those assets. And if the one-third share distributed to each of your sisters is in excess of the 2012 or 2013 annual gift tax exclusion amount of $13,000.00 and $14,000.00, respectively, then the balance of each gift would be deemed to be a taxable gift from you to each sister, for which a gift tax return would need to be filed.

Consequently, I recommend that you consult with an estate planning attorney in your area to first determine whether the division of your father’s assets among you and your sisters would amount to your making a taxable gift to each of them, and if so, whether there is anything you can do to minimize the effects of making those gifts. That attorney can also help you in preparing and filing the required gift tax returns necessitated by any such taxable gifts. Further, if it is your intention to retain ownership of your father’s home rather than selling it, that attorney can help you to retitle the home in yours and your sisters’ names as tenants in common.

Good luck.

 

Jonathan J. David is a shareholder in the law firm of Foster, Swift, Collins & Smith, PC , 1700 East Beltline, N.E., Grand Rapids, Michigan 49525.

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