Anthony S. Park

Is the highest offer the strongest offer? Not necessarily, especially in probate. Sometimes an heir or a co-executor believes they can get a higher offer. Then, all things being equal, we should take that offer. However, it’s unusual that two offers are identical. There are other factors to take into account besides the price.

3 Fs of probate homebuyers

We use the 3 Fs to make sure the buyer is a good fit for a probate real estate sale.

1. Financials

An all-cash offer is the best offer. There is always the risk of a mortgage getting denied. However, some probate properties are well-suited for a traditional mortgage situation.

We also want to see a good, healthy down payment, as well as substantial post-closing funds. In other words, the buyer should have uber financial strength.

1. Fast

We need to sell fast in probate, but we won’t acquiesce to a bad offer just for speed.

A normal seller who doesn’t like a deal can reject an offer and continue to live in the home. But for an estate, the property is vacant. So, the estate is bleeding cash every month to pay maintenance, utilities, and existing mortgage.

Also, any vacant property will fall into greater disrepair, especially over the winter. One bad winter can lead to much wear and tear. If the owner is alive and living in the home, they would know about a problem and take care of it. Whereas, in a probate property, the executor will have to keep checking in and find time to deal with issues that arise. Long-sitting vacant properties will have less value due to less upkeep.

1. Flexible

An executor cannot afford the time to handhold a first-time home buyer. The buyer needs to know what they are doing throughout the process. We’re busy working on the estate side of things. For example, we need to get additional court orders if the executor is bonded. We have to get special approval to sell the property, get tax waivers, get approval from the IRS to close the sale, and all sorts of other issues.

Now that the buyer has met the 3 Fs, in what circumstance might we accept the lower offer?

Is this probate homebuyer credible?

We often get investors as buyers for probate properties. Usually, it’s too much of a mess for first time home buyers or first-time renovators. We want to weed out those buyers who just watched a YouTube video on how to flip a house and are looking for a probate steal.

But on the flipside, experienced investors can be a little sneaky trying to get the best deal. There are savvy investors who come in at a pretty aggressive/high offer with the goal of clearing out all the other offers. Then the savvy investor becomes the focus of the negotiation. Once they are the only ones left at the table, they start nickel and diming you down to the price of the next best offer.

Will the probate home sale actually close?

Even if the buyer comes in 15% higher than the next best offer, will their mortgage actually get approved at that amount? Will the co-op or HOA approve the buyer? If we are selling an artist’s loft in Soho, and the buyer is completely unrelated to the fit and culture, they could get rejected. In New York, you can be rejected from buying a co-op for almost any reason except being a protected class under anti-discrimination laws.

Again, savvy investors may make the highest offer, but when they can’t get it negotiated down to their liking, they will bail. This does not mean that you will get to keep their down payment; they will just litigate. It’s not like a traditional buyer whose eggs are all in that basket. These investors have money to let things sit for a few months while they sue you. We avoid those buyers like the plague, because we do not need probate held up and the property still sitting vacant.

Sometimes, an offer is too good to be true. We know enough to see the red flags. Naturally, clients want to know why we may not accept the highest offer. We have to explain carefully to our clients that these types of deals will not close at that offer number.

If you want to learn more about how probate works in general, check out my book, "How Probate Works,” available on Amazon.

Request your free consultation

 

A few Solo Agers have asked if they can use beneficiary designations instead of a traditional estate plan. We’ll explain some pros and cons of beneficiary designations, and why a professional executor may work better.

Why traditional estate planning doesn't work for Solo Agers

Most traditional estate plans are centered around a friend or family acting as your executor to manage probate. Solo Agers often don’t have an assumed family member to serve in this role. Sometimes a Solo Ager has a friend or sibling, but for several reasons, it wouldn’t work out for those loved ones to serve. For example, friends and siblings may be the same age or older than the Solo Ager. There also may not be the same level of trust that one would have with a spouse. Or maybe the relationships are estranged.

For the reasons above, Solo Agers seek to avoid the need for an executor altogether. It’s not hard to blame them. For example, we had a Solo Ager client (no kids, no family, no close friends) who could not get it through to other attorneys that she had no one to appoint. She became so frustrated with their standard advice that she wanted to avoid appointing an executor altogether.

Why Solo Agers like the idea of beneficiary designations

Beneficiary designations go directly to the heirs and “avoid probate.” This is common with life insurance and retirement plans. When someone dies, the beneficiary just fills out and submits claim forms. There is no need to go through probate for that particular asset.

Sounds easy and great, right? But in most cases, using only beneficiary designations does not work. Sure, it would work for a particular account, but realistically, you are probably not avoiding probate altogether. In order to completely avoid probate, you need a 100% perfect beneficiary designation plan. This means you cannot leave any assets out of your plan (zero assets left in probate, zero lingering debts or taxes). This becomes highly unlikely.

Any outstanding debts at the time of death need to be paid by the estate representative. Because of this, probate has to happen anyway to figure out pro-rata which accounts need to be reduced to pay your funeral bill or lingering medical bills, unsecured mortgage or credit card bills.

If all assets go to named beneficiaries, then the IRS goes directly after your beneficiaries. Your heirs will be harassed until the taxes and debts are paid. No one wants that for their loved ones. Additionally, it’s unlikely that someone will volunteer to act as your executor and deal with these issues.

Why Solo Agers like the idea of a professional executor

The main attraction is that you appoint someone (experienced) to handle everything. The worry is that it will be hard to find a professional executor and it will also be expensive to hire one.

Regarding the cost, the executor’s fee is set by state law. This fee is the same whether you hire your 19-year-old unemployed nephew, or the esteemed professional executor. It is more bang for your buck to go with the professional!

How do you find a professional executor? First, you know that we can fill that role! Second, you can go to a bank and see if they have a trust officer who can serve (even if you don’t have a trust). However, most banks have liquid minimum asset requirements of 2 million or more (meaning this cannot include your home).

How do you name a person as your executor? You don’t necessarily have to pay an estate attorney to draft your will. While it’s usually a better idea to hire an attorney to draft the will (especially in complex situations), there are plenty of good estate planning software programs you can use yourself.

If you find a professional executor, interview them before you commit to appointing them. To learn more about executors and estate planning, check out my book, “The Solo Ager Estate Plan.” For a free E-copy, click the link below.

Free copy of "The Solo Ager Estate Plan"

Complete this form to receive your complimentary copy of Anthony’s Amazon best-seller, “The Solo Ager Estate Plan”

Most people correctly assume you need a local executor in New York, but they may not know exactly why. Let’s review a few real-world scenarios and reasons why you need an executor local to New York.

KYC requirements

KYC stands for “know your customer,” and this applies to banking requirements. Banks take steps to make sure the customer is who they say they are. This helps prevent fraud, terrorism, and money laundering. Often banks require meeting the executor in person to close an account or open the estate account – they have to physically see the authorized person sign the opening and closing documents.

This may seem hard to believe, since you can open a bank account via text, app, website, etc. in minutes nowadays! However, in probate, an executor represents someone else (the estate or the heirs). Going to the bank in person is usually required and very inconvenient for an executor who lives far away.

The process also applies to brokerages or any regulated financial institution.

Selling New York real estate

First, we’ll talk about the physical logistics such as the cleanout, renovations, and choosing the broker. It may be possible to do these things remotely, but it’s better to be there in person to oversee that nothing is breaking and that the renovations are up to par. Someone should be there to make sure the personal effects are sent to the heirs properly. Similarly, would you buy a home by video, or would you like to see it in person?

Choosing a broker in person is important to help get a sense of whether they understand the nuisances of the particular unit and type of neighborhood.

When it comes to New York real estate, there is a good chance you will be dealing with a co-op. We’ve talked at length before about New York co-op rules. Some of the co-ops require, above and beyond New York state law, that the executor be a New York resident. Co-ops are their own little kingdoms with their own set of rules. It is really tough for an outside executor to understand the co-op rules if they are not familiar with New York co-ops.

Also, real estate closings in New York are not conducted remotely or by FedEx. We still sit around a table for 3 or 4 hours in-person and then sign the papers furiously at the end. Antiquated, yes, but it’s how it’s done.

Dealing with local bureaucracies

Until recently, ordering death certificates online didn’t exist or at least didn’t apply to New York City. You had to go down to the Health and Human Services Department and stand in line. To get it done quickly, you better know the lady behind the desk!

Similarly, while you can technically order court documents online, it is actually easier if you have someone get them in person. For example, to order a certified copy of a file, you need to know the page count, because they charge per page. How do you get the page count unless you go to the courthouse and see the file? Calling and asking how many pages are in the file isn’t going to happen.

We know that these seem like odd examples, but these are real life situations. That being said, my book, “How to Hire an Executor,” is definitely a good idea if you are thinking of appointing an out-of-town executor.

Request your free consultation

 

 

“There’s no such thing as a perfect estate plan,” Sherlock Holmes would probably say if he did probate. What we mean is that things may not work out the way you plan, no matter how hard you try.

We’ll review an anonymous probate case study, where even in an ideal planning scenario (knowing the time of death to the minute, and plenty of time to plan ahead), there were all sorts of probate problems.

Solo Ager, Linda, was terminally ill, and had a planned end of life. This means she knew, to the minute, when she would pass, and she had months to plan in advance. Here’s how her probate unfurled. This is not a criticism of Linda; rather an acknowledgement that it is difficult to plan a perfect estate.

What part of her estate plan worked?

First, Linda hired us as her professional executor. This acted as a safety net because we are experienced to look for problems (and she let us know that there would be problems).

Linda also had pre-planned funeral arrangements, which allowed her remains to be treated exactly how she wanted.

She made sure to arrange for the care of her dog. This helped to avoid the panic of a dog in the apartment with no caregiver.

Lastly, she did a good job of canceling her utility services. Usually, we have to determine what services the decedent utilized, so this saved lots of time.

What part of her estate plan didn’t work?

First, Linda did a good job of preparing her will and naming a professional executor. However, she kept her original will in her apartment, instead of storing it with her attorney or somewhere else. This caused problems for several reasons.

If your original will gets lost, it is presumed that you intentionally destroyed it, thereby revoking it. If your attorney, CPA, or trusted advisor loses it, then they can petition the court to rely on a copy. The professional has no right to revoke your will, so it can be assumed that they just lost the original. While a professional losing a will is not good, at least it doesn’t negate the whole thing.

Storing the original will in your apartment requires another layer of the court process. The executor needs the will to get letters of testamentary in order to enter the apartment. This doesn’t work when the will is in the apartment to begin with. It’s quite the conundrum. It's not the end of the world if this happens; there is a special procedure in place so the executor can enter the apartment to look for the will. This procedure just adds more time and money to the process.

Second, Linda relied too much on her cell phone. She had a lot of information on her phone, and she referenced that information in her instructions to us. She even gave us the password to her phone. Unfortunately, her phone was stuck overseas. We learned the hard way that you can’t just mail a phone. The battery causes issues in shipping, and the phone may be dismantled by the custom agents. There is a lot of red tape in mailing a phone. Now, either I or another authorized person will need to transport the phone to the United States.

Lastly, Linda arranged for her keys to be mailed to us, but we have not received them. Once we get appointed by the court, we will work it out with her apartment building.

What were some unexpected probate problems?

First, Linda assumed that her friends and heirs would work harmoniously with her professional executor (me). So far this has not worked out. One family member thinks I am a fraud because Linda didn’t tell her family about her plan. Another heir is not happy about how this is working out, so the heir hired her own attorney.

Linda assumed that I would be able to call her family and friends to get information that I need. But that didn’t happen. I doubt Linda expected this from her loved ones – no one usually does.

Of course, we will work around all of these issues; it’s what we do! From a planning perspective, her plan was a very good best-case scenario. There was no time variables and she had plenty of time to plan. But, even in the best situation, nothing is perfect.

To learn more about probate, check out my book, “How Probate Works,” available on Amazon. The best way to plan is to look at how it may all unfurl in the end.

Request your free consultation

 

 

 

How long does probate take in New York if the estate includes bitcoin? As we talked about in  a prior blog How Long Does Probate Take in New York, generally probate takes 15 months or longer; sometimes up to 3 years. Those numbers are actually on the lower side, because everything is more delayed these days.

Here we will discuss how a new-ish asset like bitcoin may add some delays.

How long does it take to become executor of a New York estate with bitcoin?

Typically, it takes about 3-6 months to file and get the court paperwork naming someone as executor. The reasons for the delays are:

1. Collecting documents;
2. Court delays; and
3. Hearings before the court will decide who should be executor.

Even with bitcoin added to the mix, this step of the probate process will remain about the same. The only area where bitcoin would make any difference is the estimated value of estate on the probate petition. The executor may have trouble pinning down how much bitcoin the decedent had. Also, because bitcoin is a newer hot topic, the knowledge that the decedent had bitcoin could attract greedy heirs. “Hmm, Uncle Joe had bitcoin; maybe I should contest his will,” etc.

How long to settle an estate with bitcoin in New York?

Typically, it takes 15 months to 3 years to settle an estate. Settling an estate means the executor collects assets and pays debts and taxes to get the net amount to distribute to the heirs.

Of course, after 2020, everything has slowed down. Probate is currently taking much longer than mentioned above. Then, if you add a newer asset like bitcoin, a few more months may be added to the process.

The first reason is because of bureaucracies. Even traditional banks and brokerages are not great at handling decedent's estates. It’s a constant game of phone tag. New bureaucracies (exchanges such as Binance, Kraken, Gemini, Coinbase) will probably struggle with processing the death claims. They may not yet know what they are doing, because they don’t have a well-oiled machine for this kind of process.

The next possible cause of delay is if your decedent held his own keys and own wallet. Taking custody of self-hosted wallet and transferring it to secure multi-sig estate wallet could be time-consuming. The executor would need a lot of education to know how to handle it. It may be wise to appoint an executor who is familiar with both probate rules and bitcoin custody.

Another cause of delay for the executor is deciding whether to liquidate the bitcoin (convert it to dollars).  With other assets, you want to covert the assets to dollars as quickly as possible to avoid the risk of price fluctuations. But bitcoiners tend to be hardcore and may specify that they want the bitcoin (not dollars) to go to the heirs.

Lastly, taxes add time to the process. Besides estate tax, figuring out the capital gains tax can be daunting. Even just filing a regular income tax return with bitocin may cause your tax preparer and examiner to conduct additional research on the rules. As we discussed previously, getting tax clearance tax a long time, even without bitcoin.

How long to close an estate with bitcoin in New York?

Generally, the final phase (closing the estate) is anywhere from 3 months to 1 year. Again, the executor collects documents (statements, transcripts, and proof of what occurred during the probate process). Then the executor prepares the accounting, which are the books and records in a specific format required by the court. Lastly, the executor has to deal with any contests or objections to the will. Dealing with a contested will can add months to the final phase.

So, when the executor collects documentation of the assets, how does he document bitcoin acquisition? You can’t call a bank and ask for a ledger. You might be relying on screenshots. It’s not even clear if you can rely on the exchanges; you may have to reference the mempool.

How does the executor document bitcoin sale? Hopefully the sale was made on the exchange, and you can document it that way. After a sale, how does the executor protect himself and ensure the heirs that the bitocin didn’t lose value?

If you have an inexperienced person putting together an accounting and the court doesn’t accept it, much more time will be added.

We’ve tried to apply much of our probate knowledge to bitcoin situations. Let us know if you find this useful. Also check out my book, “How Probate Works,” to understand how probate works in general. Then, add to that all the complexities of probating an estate with bitcoin!

Request your free consultation

 

Many of our Solo Agers wonder “how will my executor know I died?” (Especially if they’ve chosen me as their professional executor, as opposed to someone they see daily). Solo Agers tend to live alone, so this is a very understandable and common question.

Notify in case of death

In New York, many Solo Agers live in buildings with a doorman, which is very convenient. Many of these buildings have “Notify in Case of Death/Emergency” forms. The Solo Ager would put my name on the form and indicate that I am the executor. Also, your doorman or super will know if something is wrong when they don’t see you coming and going anymore. Over time, they tend to recognize routines and changes to them.

Some doctors have similar forms to add my name as attorney/executor. The doctor will know what to do from there.

Perhaps you made pre-paid funeral arrangements, or you have chosen your funeral home. The funeral home should also have the same type of forms.

Leave clues

Aside from having official paperwork to notify the executor, you should also leave clues of who to contact in case of death.

Make sure your executor is listed in your paper address book. Believe it or not, it’s not always easy to get contact information from a person’s cell phone.

Another way is to put the executor/attorney’s business card on the refrigerator. Hopefully it would be obvious to someone who comes into your home that they should call that attorney upon your passing.

Once you have asked us to be your executor, we send you items on occasion, such as books and holiday cards. This is a less subtle way to let someone know who to contact. Maybe your neighbor comes in and finds that you have passed. If she sees the “How to Hire a Professional Executor Book” on your coffee table and a holiday card from us on the mantel, then hopefully she would put the clues together and call our office.

Annual check-ins

Once you hire us to be your professional executors, we call you for annual check-ins. These calls will naturally result in casual mentions among friends: “I was just taking to my executor…”

So now your friends know that you have a professional executor, even if they don’t know my name. That should trigger them to search for my name upon your passing. Asking friends to remember little details of your life is probably not realistic. So, a few clues are more likely to recall something you said earlier.

Another reason these check-in calls are helpful is that the conversations give me an update on ongoing health issues. If there is a downward trend, I will know to monitor your situation a little more often.

Worst case scenario, if you were to pass away a minute after we hang up from our annual call, I'll know within a year when it’s time for our next call. It’s not ideal, but it works.

There’s no perfect way of letting me know, but these are the most common scenarios. If you don’t already have one, please click the link below to get a free copy of my book, “The Solo Ager Estate Plan.”

Free copy of "The Solo Ager Estate Plan"

Complete this form to receive your complimentary copy of Anthony’s Amazon best-seller, “The Solo Ager Estate Plan”

Every executor faces the tax risks unless they get proper tax clearance, which can take a LONG time. Here’s how we’ve seen that plays out with professional executors, non-estate attorneys, and amateur executors.

Professional executors set patient expectations

We advise heirs from the beginning that this will be a long process! This probably turned away many prospective clients who thought I was crazy for saying it could take years and decided to go with an attorney who told them it would take only months. (I’m pretty sure it ends up taking years for those attorneys, too). I’d rather be warned that it could take years, than to expect the over-promised and under-delivered “few months”.

We keep reminding our clients over the months that it is a long process. People don’t want to hear it, but at least they’re not wondering what’s going on.

An example of how long things can take: We filed an application for tax clearance for Mr. M.’s estate in September 2020. The IRS just responded via a computer-generated letter in July 2022 (almost 2 years later!). The IRS hasn’t even granted the tax clearance yet; the letter just acknowledged that they received our application.

This is why we set up the expectations in the beginning, because there’s nothing we can do about the government.

General attorneys react

General attorneys can be very reactive if they have not had experience in this area. Many potential clients call us in similar situations where things are going slow, asking if their attorney is doing something wrong.

The potential client is dealing with the same set of facts that we deal with, except that his attorney has not set any expectations and is communicating with the heirs.

In order to get a case, some attorneys tell prospective clients that “probate” takes a few months. What they mean is that’s how long it may take to get letters testamentary. They don’t tell the client that getting letters is just step 1 of the 3 stages of probate.

Similarly, once the house is sold or accounts are collected, non-specialist attorneys tell the heirs that payout is imminent. But the inexperienced attorney comes to realize that to protect their client (the executor) from personal liability to the IRS, they must first get clearance.

Then the attorney has to break the news to heirs who thought they were about to get a check that it may be a LONG time. It's all about expectations and being able to see a couple steps ahead; not just react to the situations as they come.

Friends or family executors get blindsided

The previous situation isn't great, but it's not as bad as when an amateur executor gets blindsided. Sadly, amateur executors (friends and family) often don’t even realize they must get tax clearance first. Then they get hit with the personal tax liability.

For example, Ms. V. was the executor for her uncle’s estate, and she didn’t know to get the tax clearance. She just paid out the funds quickly to happy heirs.

Then IRS sent her a letter informing her that the estate owes $20,000 in taxes.

She had to try and recoup the funds from the heirs. Mrs. V. reached out to the heirs and waited patiently for the checks. How many checks do you think came in? None.

Some people might say, “Oh, my family wouldn’t do that to me.” Well, some heirs may want to help out, but in some cases, they’ve already spent their inheritance.

Unfortunately, the IRS doesn’t care who pays the taxes, as long as they get paid. Executors are personally liable. So, Mrs. V. had to come up with a way to get $20,000 to pay the IRS. To this day, I do not know if she took out a loan or if she was able to recoup the money from the heirs.

Having an amateur executor is probably the worst situation. They don’t know to how set expectations, and they end up getting into messy situations. This is a good reason to check out my book, “How to Hire an Executor."

Request your free consultation

 

 

Here are our tips for cleaning out the decedent’s home and getting it presentable for sale.

Identify the estate clean-out problems

For example, did the decedent die recently, or has some time passed? Sometimes folks become ill and move into a facility, leaving their home behind. We often see these homes in disrepair (leaks, mold, gas shut-off, rotting food, etc.). Alternatively, if the decedent was living at home and died suddenly, then there may not be so many issues. Remember, in New York, you won’t be able to get into the house right away after someone passes. You will need to get permission, and that process should be built into your timeline.

Next is the amount of clutter. This depends on the square footage of the home. Was the decedent a hoarder? How much are the heirs taking with them? Whatever the heirs take will reduce the amount you have to clear out.

Lastly, are there property-specific issues? We’ve discussed in the past how New York co-ops are a very unique animal! Lofts can present specific issues, as well. Make sure you take into account elevator access, permission from the Board, etc. when you develop your clean-out plan.

Find the best clean out service for your estate

There are two types of services: clean-out and cleaning.

Clean-out service means the big, burly dudes who carry out the furniture, etc. A cleaning service provides vacuuming, wiping, dusting, etc.

The best service for an estate situation does it in one shot. Work with a team who is experienced in sizing and estimating the deal and is big enough to provide crew and trucks to handle it in one day. There’s no apartment in New York that can’t be handled in one day with the right team.

We had a recent bad example: GotJunk sent 1 truck and 2 small guys for a 2,500 square foot loft! There was a lot of stuff, and we had to do the clean-out over two days. That’s two days of cost, as well as inconveniencing the other neighbors in the building.

Second, make sure the service is reputable and insured. Buildings will require a COI (Certificate of Insurance); they won’t let anyone in to do the job. Co-ops and neighbors also appreciate well-manned crew. They don’t want bubble wrap and tape littering the halls and elevators. Keeping the common areas clean goes a long way in maintaining the relationship with the neighbors and co-op board.

Lastly, a good clean-out service will get the home broom clean. They not only clear out the junk but actually bring in the broom to clean. We’ve dealt with some clean-out companies who left bits of extension cords and zip-ties and tape on the floors. While it may not be a big deal, it does shift the burden and cost on to the next step: the cleaning service.

How to choose a cleaning service

The goal is not to clean the home so someone can move in and eat off the floor. You need to have the home presentable for sale. A sell-able condition may mean different things for different situations.

If you are selling to the typical retail buyer, then you should get the home as pristine as possible. However, if you know the home will only attract investors, broom-cleaning is fine.

If the house situation is borderline toxic, you may need a professional crew. For example, there could be bodily fluids from the decedent’s death. Or maybe the level of mold in the bathroom or kitchen is dangerously high. If you encounter these situations, you can search for a local crime-scene cleaner. It might sound extreme, but they can provide a next-level cleaning service.

As we’ve discussed before, there are a lot of moving parts to the probate process. To dig in deeper, check out my book, “How Probate Works.”

Request your free consultation

 

 

Probating bitcoin is more complicated than usual probate. We’ve discussed the 3 stages of probate generally. Here, we’ll describe some specifics of the process for when the decedent owned bitcoin.

How to find out if deceased had bitcoin

First, did the decedent even own bitcoin? We previously discussed three steps to take to find out if the decedent owned bitcoin.

To recap:

1. Check for hardware wallets, which are little devices that look like a USB drive, calculator, or small smartphone.
2. Check the decedent’s phone and computers for software or soft wallets. If you have no idea what those apps are named, just do a Google search for the most popular software wallets. New programs and apps come out all the time.
3. Look for instances of 12 or 24 words. You could find these on a piece of paper, etched into metal plates, or anything else you come across that may be a seed phrase to the decedent’s wallet.

Get letters testamentary for bitcoin

Once you determine that the decedent owned bitcoin, you need to get letters testamentary.

Is this practically necessary?

Do you really need letters testamentary for someone who had self-custody (held in a private wallet and not on an exchange). Probably not, unless bitcoin is held in exchange. If the decedent held the bitcoin privately, there is no gatekeeper to get past. Once you have the decedent’s key or PIN, you have possession of the bitcoin.

Is this legally necessary? Absolutely.

Say you walk into the decedent’s house, find cash, pick it up and walk out. Sure, practically, you can do that. But it doesn’t mean you should! Taking possession of the bitcoin without letters testamentary is no different taking personal property, cash, or jewels from the estate without proper authority.

Take custody of the deceased’s bitcoin

Now that you confirmed the decedent owned bitcoin and you have letters testamentary, how do you take custody of the decedent’s bitcoin? Generally, you want to move it out of the decedent's wallet into a new wallet for the purposes of the probate process.

If the bitcoin was held on an exchange, submit paperwork (death certificate, letters testamentary, claim forms) to authorize the withdrawal. This is similar to the process involving a brokerage account.

If the bitcoin was held in self-custody (ex. a hardware or software wallet), make sure you have all necessary device(s), seed words, pins to access the wallet. I recommend moving it into a new wallet for probate. For the executor who knows how to cover their own tail, I recommend moving the bitcoin to a 2-of-3 multisig with a reputable custody service (Casa, Unchained, etc.). The reasons are that the custody service will hold a third key; in case the executor dies during probate, and to minimize risk of the executor being held personally liable for losing keys/custody. There is more of a chance of someone losing the information than there is for other disasters. As an executor, you don’t want to put yourself in that position. There’s no perfect solution, but the 2-of-3 multisig creates levels of redundancies and backups.

Sound complicated? It is! And it’s exactly why you should consider naming a professional bitcoin executor.

Should executor sell or hold bitcoin?

Now that the executor has possession of the bitcoin, should the executor sell or hold during the pendency of probate? This is the toughest question.

With stocks and other volatile assets, the general rule is to sell and liquidate. Why? Because executor’s job is to preserve value, not grow the estate. Executors will only get blamed if the price goes down; there’s no reward or upside if the estate goes up.

BUT, some bitcoiners are pretty hardcore and may direct that they don’t want the bitcoin liquidated into dollars. If decedent or the heirs really want to keep the bitcoin holding, the executor should prepare paperwork to document that the consequences are not his fault. Holding the bitcoin poses pretty considerable risk for the executor, so most won’t do it. Again, if this is important to you, consider hiring a professional bitcoin executor! You need someone willing and comfortable bearing the risk under the right circumstances.

Even if the decedent tries to spell it out in the will, the executor may not be comfortable taking the risk of holding the bitcoin. If this is the case, it may be beneficial to find and name a professional bitcoin executor in your will.

Close an estate with bitcoin

Many folks think once the executor collects the assets/bitcoin, they can turn around and immediately relay it to the heirs. NO, the distribution of the estate does not occur immediately after the executor gets his hands on the hardware wallet. The executor must wait for all debts, expenses, and taxes to come in and pay those first.

Only after all those final debts and expenses are cleared can executor safely distribute bitcoin. If an executor pays out the bitcoin before he settles taxes and debts, and then receives a tax bill, he’s going to have problems. The executor either has to ask heirs for money back, or he will have to pay out of his own personal funds.

It’s best to wait until you have receipt and release from the IRS and letters from creditors stating that they have been paid in full. You don’t want to be in the position where you ask the heirs for money back to pay debts. They probably won’t give the money to you anyway.

We’ve tried to apply much of our probate knowledge to bitcoin situations. Let us know if you find this useful. Also check out my book, “How Probate Works,” to understand how probate works in general. Then, add to that all the complexities of probating an estate with bitcoin!

Request your free consultation

 

How does receiving an inheritance change your own Solo Ager estate plan? A family inheritance will increase the size and complexity of your estate, so let’s discuss what that means for Solo Agers.

Increases the size of your estate

How does this inheritance result in a more complex probate for you later on?

The more you have, the higher the risk of conflict. This is because there is more at stake. If your niece and nephew were going to each receive $20,000; that’s a nice chunk of change, but not worth hiring lawyers for. But if they are now going to receive six figures each, it gets more complicated. Also imagine if you plan to leave the niece $100,000 and the nephew $300,000; the niece could feel she’d have the funds to hire an attorney and make it worth the fight.

Then there’s taxes, and we're not just talking about estate tax. When you have more assets, you’re more likely to have capital gains issues. Or, even ordinary income tax clearance issues on your final 1040. The higher your net worth, the more complicated or diverse are your assets. If you inherited a bunch of stock and bought/sold them to organize your estate, it could cause issues getting the tax clearance on your 1040 if you die shortly after.

It also depends what you are inheriting. If your current estate is made up of bank, brokerage, and real estate, then it’s probably pretty straightforward. But what if you inherit commercial real estate, a share of a small business, art, Bitcoin, etc.? Those are new assets that can add twists to your plans. Maybe the executor you appointed isn’t equipped to deal with these types of assets.

This leads to the next question: Do you now need a professional executor?

As Solo Ager, you may have chosen a friend or distantly related family member as executor. Now that your estate is more complex than you originally planned, the more burdensome and difficult it is to administer the estate. You’re now asking more from the executor than you did initially, and maybe it’s time to consider hiring a professional executor.

Reduce amounts to your heirs

Receiving an inheritance could compel you to reduce the amount you give to your heirs. It seems counterintuitive; if you inherited more, why would you give less? For example, our client recently inherited a large amount of money from his father, who passed away. His initial estate plan was to give a good chunk to his niece and nephew (25% of his estate to each and 50% to charity).

Since he received dad’s inheritance, his estate is significantly larger. In our client’s opinion, 25% of his now-large estate is a bit too generous for each of his heirs. On top of all this, the niece and nephew have already inherited from our client’s deceased father, too!

In this situation, our client felt it was appropriate to reduce the heirs’ shares and bequeath those funds to others.

Leave more to charity

Along the same lines, you may decide to leave more to charity. If your estate is bigger, you have more options to give to good causes. You can give (more) to charity, since you have enough to leave good amounts to friends and family and still have funds left over.

Now that you have more to leave to charity, there are different techniques and strategies available to you. For small estates, it’s not worth the legal and accounting fees to set up certain plans. But now, the amount you’re leaving to charity is large enough to cost-justify a trust or other planning tool that better suits your legacy and goals.

We have Solo Agers who are grateful to have inherited from older family members, and they have told us how it’s impacted their own estate plans. We wanted to share with you so that you can be prepared, too.

If you have not already done so, please click the link below to get a free copy of my book, “The Solo Ager Estate Plan.”

Free copy of "The Solo Ager Estate Plan"

Complete this form to receive your complimentary copy of Anthony’s Amazon best-seller, “The Solo Ager Estate Plan”