Length of time to settle estate
I was left a 25% share of a sizeable estate(approx 12 mill) until i turn 55 I am only to receive the income. The person who established the will passed 2/02. I am told by the executor that the IRS has to review the estate tax return and can come back to the estate and demand more $$ if they do not agree with the return.
Currently I am receiving $2000 per month until the estate is finalized, is this an approproate ammount??? and how long should it be before I can expect to invest my share of the estate. Is there any way I can protest this way of distributing my share, another family member is getting all of his inhertance now?
2 Answers from Attorneys
Re: Length of time to settle estate
As the above answer states, most of your questions can be answered by referring to the will and any trust documents that go with it. They are the primary documents and determine how most issues should flow.
Is $2000 is a reasonable payment?
It may be but you should take a look at the nature of the assets and the amount of income that they are producing. Although the executor of the estate must reserve funds for reasonably anticipated debts and expenses of the estate they also owe a duty to provide the beneficiaries reasonable access to their property. The estate’s attorney or accountant could most likely give you a better idea of what debts they are expecting and what is would be a reasonable payment based on the actual income that the estate is producing. I would check with them.
As to the IRS review – When the IRS receives an estate tax return they can either accept it as filed or audit the return. If they accept the return as filed the IRS will send the executor a closing letter stating so. But if they are auditing the return the timeline could extend indefinitely. I would check with the executor to see when the return was filed and if the IRS has accepted it or are examining the return. If the person who established the will died in February of 2002 then the tax return was due, at the latest, in May of 2003. Therefore, the executor should have some idea at this point of the status of the return now.
Re: Length of time to settle estate
If I understand from your description, ALL of the income produced from the principal amount belongs to you (what is left over after paying debts, of course). Whether you get it now or later, legally it is your property as much as the money in your pocket. Once the debts are paid off, the trustee must "catch up" and pay you ALL of the investment income for the decedent's death to date. Make sure that the trustee understands this distinction. So, paying $2000 per month should not change how much money you eventually get.
However, the trustee does have an obligation to first make sure that all the remaining debts of the decedent are paid. You would not want the trustee demanding money back from you to pay debts, such as the IRS. The trustee has to make a guess as to how much to distribute and how much to hold in reserve to pay off possible debts. How much is reasonable? It's a guess, and you might disagree with him or her, but the trustee must make the best possible guess.
However, you ask about a different distribution compared with another family member. In order for the trustee to treat the two of you differently, the will would have to give different terms. The trustee cannot treat you differently UNLESS the will has different terms about you vs. the other person. You can sue to enforce the terms of the will and demand that the will be followed, at least as it benefits you.
The trustee has a legal responsibility to all the beneficiaries of the trust to act in their best interest, according to the exact terms of what the trust actually says. However, first check whether the will says something different about that other person and whether there is a sound reason for it.
Unfortunately, winding up even a small will can take far too long. This mainly consists of creating a careful inventory, making sure all debts are found and paid, and filng reports, etc. These things are slow. However, 2 years is starting to get excessive. It is reasonable to hold money in reserve to make sure there won't be further debts to pay. But on the other hand I don't know how you can know when the IRS is "done" reviewing a tax return. Technically, the IRS could challenge any tax return within 3 years of the end of the taxable year. If the trustee is confident that the tax returns are correct, rather than having real questions about whether something is allowable or not, then it does seem to be unreasonable to merely speculate that the IRS might challenge the tax return. Especially where there would still be money in the trust to pay the taxes if there were a challenge, holding back income on pure speculation may start to be unreasonable and improper. You can always go to court to vindicate any of your interests in the trust.