I give an odd report to all.  I’m currently living the bachelor life until I join Anne in San Francisco.  With our running back and forth from California this year we will (one or both) occupy the house some seven months (a new record).  The weather has been good.  July experienced near record coolness.  I guess that prepares me for the chill of San Francisco. 

I have enjoyed life on South Mountain with its Wood Thrushes and Hooded Warblers for the first time in May.  This morning an American Robin still sings, but bird song is already waning and the cicadas have taken up the day shift and katydids the night shift of song. 

I stayed behind now to conduct various chores.  Among these was probate of my mother’s estate.  This has been a fascinating activity.  We often hear advertisements about “avoiding probate” and wonder of its difficulties, but mostly we shrug off concerns.  We deal with it as we have too.

I discovered upon my father’s death that my parents had successfully accumulated some wealth over the years despite a limited income.  My mother was the financial czar and demanded savings.  They could have made more sophisticated investments, but hey, ninety percent of becoming wealthy is spending less than you earn.  They always did that.   

When my Dad died I managed the probate matters for my mother.  This was relatively easy because he left everything to her and most of the assets were jointly owned.  Still, I found the process to be a bit of a drudge.  They used four banks.   I learned that different banks operate differently and some seem to barely operate at all.  I decided that I never want to do any business with one particular bank. 

My parents owned nine mutual funds and individual stocks.  They did not have a broker and so the accounts were held separately through the mutual fund companies and stock transfer companies.  Making the transfers in title entailed sending a letter with the proper forms and a death certificate to each of the agents.  Many of the forms required two signatures, one notarized, and one medallionized.  That meant visits to a notary and to a bank.  Lot’s of time and trouble. 

After that experience I moved as many of my own separate holdings into a common brokerage account to make life easier for my heirs.  I should have consolidated my mother’s accounts too, but I didn’t want to hassle her with that task.  I decided that I would need an attorney to manage her estate when she passed.

Well, she died last December and I immediately notified our family attorney.  The good news was that she left a healthy positive balance.  So many of our friends have parents who died with debt and still had to engage in this thankless task. 

With recent changes in federal law, there would be no federal estate tax, thank goodness, but Pennsylvania has an inheritance tax on any amount.  For direct descendants the tax is 3%.  There is a discount for early payment and I told the attorney I wanted to take advantage of that.  He said that would be practical and wise.

There were two heirs.  I was named executor.  I told the attorney that I wanted to minimize costs by doing as much of the work as possible.  That included the liquidation of assets and the deposit of proceeds into the estate bank account.  I expected this to be a substantial project and it was.  The attorney and a capable assistant guided me through the process.  She walked me to the courthouse to sign documents and to the local bank across the street to set up the estate account. 

I learned even more about the banking industry.  I have learned especially that large banks, being beat up so much by the government, make it very difficult to accomplish small tasks.  Too much red tape.  This week, for instance, I needed another ot those medallionized signatures.  I asked for it at my national bank.  It demanded a probate “short form.”  I had not brought one because it was not necessary.   So, I went to a local bank and was graciously provided the necessary certification.  

What is the old rule of thumb?  “Banks loan you money only when you don’t need to borrow it.” 

Each financial institution is a fortress that has to be won over.  Each has its own forms and demands certain things.   Some want death certificates, others affidavits, others short forms.  Some want all.  One bank had still not changed all of the accounts into my mother’s name although she and I had paid them two long visits and provided all requested documents two years earlier.   I told the banker I could provide another death certificate for my father, but I would be very unhappy to do so.  He did not demand it. 

With regard to the stocks and mutual funds, I had become familiar with the procedures from managing my Dad’s estate.  The process was more complicated this time, but I assembled the various packages and made stops at the law office for the notary and the bank across the street for the medallion.  I had made sure to buy plenty of death certificates.  They are not cheap!

Good news was that several of the stocks were held by one outfit, the American Stock Transfer Company (AST).  I was able to bundle five of these assets and send one letter to have the stocks transferred to the estate and sold.  That worked fine except for one stock.  For a reason understood only by financial gurus, this stock could not be sold directly.  So, I had to set up a brokerage account for the estate.  Wouldn’t you know, AST has a brokerage shop. 

To establish the account I had again to prepare a package including a death certificate, a “short form” and notarized and medallionized signatures.  My letter directed that the broker establish an account and obtain the stock from AST.  Two weeks later I received notice that the account had been established.  A week after that another notice confirmed the transfer.  I then picked up the phone and ordered the sale of all shares.  A week after that, a week ago,  the check arrived. 

I thought this was the final liquidation, but I was wrong.  My parents largest asset was a pile of federal savings bonds.  I was going to process these, but the attorney suggested they could do so more efficiently directly through the United States Treasury.  He said that a form could be used to cash them en mass.  I looked at the pile of bonds and decided that was best.    I mentioned that there was one $50 face value EE bond in my father’s name.  I said that if that was too much bother, we could throw it away.  Then I forgot about it. 

In retrospect, I should have thrown that bond away when I found it.  Today is is worth $35.  Last week I opened a fat envelope from the attorney.  It contained that bond, a three page letter, a form, and four pages of instructions.  The law office completed most of the form.   How much do you suppose it cost for them to provide the letter and complete the form?  I’ll find out.   I finished the form drove to town, and obtained, after some nuisance, the medallion and mailed it registered, return receipt requested for another $6.50. 

I suppose the attorney could not just have tossed it, and I, as executor, am responsible to conserve the assets, but that was no asset! 

The lawyer briefed me on the process at our first meeting.  He told me I could assess a charge for my time.  I told him no, I wanted only to be reimbursed for my expenses.  Later, we decided to inter my parents remains into the sea and I chartered a boat for this ceremony.  It turned out very well.  I said a few words and my parents were reunited in the blue waters off of Sanibel Island.

Meeting later with the attorney I asked if I could charge the cost of the boat to the estate.  He said,  “Yes, probably.  How would the other heir feel about that?  Lawyers are properly concerned with such things. 

 I said, “She was on the boat too.”

So, the business of the estate is mostly done.  The inheritance tax form has been filed and the tax paid.  The attorney says there is a chance the state will audit it, but since the assets were well defined (cash, stocks, mutual funds, and savings bonds), that is unlikely.  The attorney will complete the estate federal income tax filing next year.  There will be various interests, dividends, and small capital gains and losses associated with the assets.  The income will flow from the estate to the heirs, so we will have to delay our tax filings until the estate taxes are completed. 

Since I don’t get the last of my “amended” 1099’s until the end of March that is not a huge problem.  I’m hoping all of the estate’s 1099’s find their way here promptly.  Good news has been that my parents’ assisted living facility has faithfully been forwarding her mail to me.  The USPS could not accomplish that for some reason.  Still, a few 1099’s for Year 2013 were missing and I had to delay filing her taxes this year until I could obtain them.  I waited in line to obtain one from the Social Security Administration.  That outfit apparently does not send 1099’s to the dead which is a silly nuisance.  The dead doesn’t need the 1099, but the executor of the estate certainly does!

Of course, since I had to delay filing I had to pay an estimated tax.  And since I didn’t have the information to file I could not rationally estimate the tax.  I made a “guessed” payment and had to reclaim most of it when I filed the taxes in June.  She owed no federal tax for last year.

A small irony is that Pennsylvania imposes the inheritance tax on the savings bonds interest that has accumulated but not been paid.  We (the heirs) will, of course, also have to pay income tax on that interest.  I quickly made a large quarterly estimated income tax payment to avoid pain later.  Given the current interest rates, I find it very irritating that tax is imposed on savings interest.  At very least the earned income should be reduced by the value of inflation.  When inflation is 2% and the interest rate is 1% there are no earnings.  But, you pay income tax on that that 1% interest.   So you are being taxed on a loss.  Inflation is simply a wealth tax.  That is why the government loves inflation so much!   It is a curse on the economy and upon the population.

Last month, with the bulk of the assets liquidated, the inheritance tax paid, and no other significant liabilities (except probably a couple of more legal bills) it was time for “the major distribution.”  I wrote the checks, one to myself, and felt good about it.  The cash helps to justify our decision to make the trip to Peru next month.  Mother would have liked that. 

My work kept the costs down, but having learned the ropes, I can say it is not enormously complicated.  Thank God for the Internet and forms that can be downloaded.  Curse the devil for those forms that won’t download or print properly. 

All through the process I received dozens of letters from outfits with a simple story.  They said:  This person is deceased.  This person has this asset.   This asset will go to escrow with the state.  Complete these forms and we will obtain the value of the asset less a fee of $100 and of 30% the value of the asset and send you a check.

The first time I received one of these letters I nearly panicked.  Thirty percent of the value of the asset?  What had happened that the estate could not properly take title to the asset and sell it at nominal cost?   As it turns out, nothing.  Eventually I would receive these letters referencing assets that I had already sold.   I wondered how the outfits find out about the assets.  The attorney says they have a legitimate roll, but what they charge seems exorbitant.  Probably though, most of the returns they get are where the value of the asset is very small and folks don’t want to fuss with them too much.  They are happy to pay the fee and avoid the hastle.  I’m not rich enough for that.

One of these letters was of value to me.  My Mom had shares of Merck which spun off Medco which spun off Express Scripts.  These splits reduced her shares of Merck and gave her shares of the other two stocks.  Such occurrences wreak havoc with record-keeping and calculating “cost basis.”  When Dad died, my sister suggested selling the spin-offs.  In the end only Medco was sold, but I forgot.  Express Scripts apparently paid no dividends in 2013 and there was no communication from the company.  When I prepared the list of assets I thought it had been sold.  Then came one of those letters offering to liquidate the asset.  I went back to AST and sold it myself.  Whew! 

We might have lost that one.  It wasn’t a lot of money, but much more than the $35 we will get from the savings bond, and for no more work.

So, what can I say about probate?

It is a nuisance.  Why should the government impose estate and inheritance taxes anyway?  Income taxes have already been paid on all of these assets, but still they want more.  That is the way it is, so one has to deal with it.

I probably could have managed the estate without the attorney, but he knows the rules.  I could have figured them out, but then would have worried that I got them right.  Now he can worry.

Before you die, get your assets in order.  Have a will!  Have a list of assets!  Consolidate your savings as is practical.  Of course you want to have more than one bank (in case the bank goes bust) but keep the number down.  Same for brokers.  Have an attorney in place. 

Maintain a will even if you assume your spouse will get everything.  What if the two of you die together?  The kids will have a mess!  Even your spouse may have to go before the court to petition for his or her money and somehow live until the cash is released.

The government forces us into having too many accounts.  We’ve had  two 401K’s, one 403’B, Anne’s IRA, my IRA, and a Health Savings IRA in order to navigate the treacherous seas of taxation.  It is impossible to allocate one’s investments when your money is in too many pockets.  It’s even hard to keep track of it.  Keep a list!  Make sure someone knows where it is.  There should be a list of passwords too.

We still have too many accounts in separate institutions but are consolidating as we can.  Even many mutual funds can be moved to within brokerage accounts.  The fewer institutions involved the easier the process.

Have an attorney.  Yes, today you can prepare a simple will without one.  We have enough wealth that I thought it worth the cost to have it done right.  The attorney can keep your will.  Then your heirs won’t have to find it.   They also won’t have to figure out which is the last will if they find more than one.

The tax code is too complex.  I chuckle each year when I sign my 1040 and state it is true.  I think, “only the IRS and Turbotax know if it is true.”  All I do is enter the data as best I can.  I think some politician wrote a letter to the IRS qualifying his signature.  That is probably a good idea, but I don’t have the courage to do so.  Instead I lie.  I really don’t know if it is true, but I sign it anyway.

With regard to probate, you want the taxes done right.  In states that don’t have an inheritance tax perhaps it is less complicated, but still worth a small price for good legal advice.  The executor will sleep better at night, and that is worth the money.

My discussions with the attorney suggests that disputes among heirs creates many problems for estates.  Good will and common sense are often lost in the absence of a good last will and sound legal advice.  What a tragedy when heirs become alienated over affairs of the estate!  What a waste of money is a spat over who gets the antique car!   An inheritance is supposed to be a positive thing.  Do your best to keep it that way.

Well, that is more than enough to say.  Probate is a chore, but it is part of the management of one’s personal business, preserving and passing on assets at the behest of the deceased.  We deal with it to honor them.