Ask the Expert: Estate size may shrink

Before you decide the dollar amounts of specific

Before you decide the dollar amounts of specific bequests, consider the possibility that your estate may be smaller when you die than when you write your will. (Credit: iStock)

Lynn Brenner

Lynn Brenner Lynn Brenner

Brenner answers questions about all aspects of family finance.

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My mother, who is 93, has left monetary inheritances in her will that add up to $60,000. Her combined bank savings add up to about $35,000. Does the inheritance legally have to be paid, and if so, where does the excess money come from?

 

Your mother's estate may include other assets you don't know about, like a brokerage account or a life insurance policy. But there's no magic fund that will enable you to inherit more from her than the total value of what she owns at the time of her death, no matter what her will says.

Indeed, depending on her financial situation when she dies, you could inherit substantially less than the amount in her accounts. The reason: Her executor will use the money in her estate to pay her outstanding bills, funeral expenses, legal fees and taxes before distributing whatever is left to her heirs. From what you say, your mother's estate isn't big enough to incur an estate tax. New York estate tax is only levied on estates worth more than $1 million, and federal estate tax applies only to those worth more than $5.25 million. But income taxes are another story. Her executor will have to file her income tax return for the year of her death.

Making specific bequests can have unintended consequences when an estate proves much smaller than anticipated. "For example, let's say your will says that you leave $60,000 to your favorite niece and the rest of your assets to your children. If your estate is only worth $60,000 when you die, your children will get nothing," says Jeffrey A. Zankel, a Melville estate lawyer.

The bottom line Before you decide the dollar amounts of specific bequests, consider the possibility that your estate may be smaller when you die than when you write your will.

Websites with more information bit.ly/18UqgmN and 1.usa.gov/18Uqn1C

TO ASK THE EXPERT: Send questions to Ask the Expert / Act 2, Newsday Newsroom,235 Pinelawn Rd., Melville, NY 11747-4226, or email act2@newsday.com. Include your name, address and phone number. Questions can be answered only in this column. Advice is offered as general guidance. Check with your own advisers for your specific needs.