My brother passed away in 2020. He has two children, 14 and 19, and a wife. I am not on talking terms with any of them.
My mother passed away in 2024, leaving me with her remaining monetary assets after probate and the estate were closed. We made a verbal agreement that I would distribute 50% of the assets I received to my deceased brother's children. These assets are currently in an inherited IRA account that I must begin making RMDs from this year.
The inherited assets are approximately $120k.
I understand now, as I did not then, that I am responsible for income taxes for the RMDs.
My plan today, is to take the RMDs in a standard 1/10 1/9 1/8… and place them in a HYSA until taxes are deducted. After taxes are deducted, I will distribute the remainder to my nephews and similar accounts for my two children. 25% of RMDs after taxes to each grandchild.
I have no legal obligation to distribute any funds to my brother's children. This is not the path I am going to take. I will distribute the funds to my brother's children one way or another.
The two accountants I have talked with would not advise how best to distribute the funds to the nephews.
I can send a check to the 19 year old, but I am not sure how to distribute the funds to the 14 year old. My gut feeling is that I need to send it to his mother until he is 18. For reasons, this is not ideal.
I will accept any ideas and criticism. I am not a financial expert so I am simply looking for an idea of the best path forward. It is also important to my family that I do not create a situation that will put myself and my family in any type of liability. I will of course, speak with a financial planner before I move forward.
Thank you for your help.
How to distribute my deceased brother's inheritance to his children?
byu/OneLongEyebrowHair inpersonalfinance
Posted by OneLongEyebrowHair
7 Comments
living trust is an excellent tool for passing on an inheritance because it allows assets to be distributed to beneficiaries efficiently, privately, and with specific controls, bypassing the potentially lengthy and costly public probate process.
You can wait a few years to give the 14 yo the money. Until they are 19 or so. Or do it the formal way and have a lawyer create a trust, with you as trustee, so you distribute the money, and their mother doesn’t have access.
You have already been given the basic recommendation of setting up a trust for the 14yo and looks like it is what you had already planned on.
I would also go a half step further cause the mother is going to be a problem and in the trust documents outline the reason. You do not have to be vindictive but specifically outlining the trust was implemented in order to safeguard the inherited assets to the recipient with out familial complications per the request of the deceased. (ie this was set up so your mom doesn’t steal your money).
Trusts are a good way of doing it. You can either have them transfer/pay out at a certain age or I imagine you could have them be invested and pay dividends / cap gains.
Or look at RESP’s or first home savings accounts? RESP’s can be for any age, other accounts have age limits. You name the kid as the beneficiary of the RESP but maintain control yourself. Set it up if you pass they get full access or whatever.
I think if I was in your shoes, this is what I’d do. It’s setting up their futures, something your brother probably would want to do if he was around. Education is almost always the best investment and with the RESP being a tax deferred account it ends up being a convenient way of doing things.
As an added bonus, if they don’t go to school then they can access the account but just have to pay tax on whatever they withdraw – and return any government matching funds, if any.
What about a college fund? 529?
If there is no legal obligation, and you don’t trust the mother, maybe keep the funds invested (HYSA, or maybe an index fund ) for the next five years or so, then turn them over when he is 19 (or later if it takes him a while to reach some level of responsibility).
It sounds like your mom’s estate is fully settled, and you were the one who received the funds. If so, you get to dictate the timing of the monetary gifts.
You should consider structuring the trust with age restrictions (like waiting until the youngest kid turns 19 years old before they get any money.) In the meantime, you can invest the funds so they continue to grow.