YOUR MIND ON MONEY: What to do with a small refund

2014-02-08T09:47:00Z YOUR MIND ON MONEY: What to do with a small refundChristopher W. Yugo Estate Planning nwitimes.com
February 08, 2014 9:47 am  • 

Q: My father passed away a few months ago. We recently received a refund check made out to his estate. What happens if he doesn't have an estate? How do we cash this check? What if he gets a tax refund?

A: This happens all of the time. A loved one passes away but it isn't necessary to open an estate. Then a refund from the cable or the phone company arrives and the check is payable to the estate. Now you've got a problem.

Remember the party refunding the money doesn't know who should or should not receive the refund. There could be liability if the party refunds the money to the wrong person. To avoid problems, it is often easier and safer to issue a refund to the estate.

The problem for the family is it doesn't make much sense to open an estate so that you can cash a $50 check. On the other hand, it's $50 and you don't want to just leave it on the table.

The first thing you might try is to contact the party issuing the check and ask them to re-issue it to a different party. I've seen situations when the party re-issues the check in the name of the decedent and then the family deposits it into a checking account that still has the decedent's name on it. This isn't the preferred way of doing things, but it can be convenient.

The preferred way to handle a small refund is to use an informal probate process. Now I know that anything with the word "probate" in it can sound scary, but it isn't. Informal probate can be as simple as providing a small estate affidavit. The affidavit provides the holder of an asset with the name of a person who will see that the funds get to the appropriate parties. It shifts liability from asset holder to the recipient of the funds and holds the asset holder harmless from any liability. That way if the ne'er-do-well son runs off with the money, the cable company can limit its liability.

Tax refunds are generally easier. The IRS has a form that can be filed with the return telling it where and to whom the refund should be directed. Your accountant should be able to help you with it.

Generally, if the total of all probate assets are less than $50,000, you should be able to use an informal probate procedure and transfer the assets using a small estate affidavit. If the probate assets exceed $50,000, you'll likely need to open an estate. Remember, the $50,000 number applies to probate assets. Assets that transfer outside of probate such as jointly owned and POD accounts are not included in that number.

Christopher W. Yugo is an Attorney in Crown Point Indiana. Chris’ Estate Planning Article will appear every Sunday in the Times. Address questions to Chris in care of The Times, 601 W. 45th Ave., Munster, Indiana 46321 or to Chrisyugolaw@gmail.com. Chris’ information is meant to be general in nature. Specific legal, tax, or insurance questions should be referred to your attorney, accountant, or estate-planning specialist.

Opinions are solely the writer's. Christopher W. Yugo is a Crown Point attorney. Address questions to Yugo in care of The Times, 601 W. 45th Ave., Munster, IN, 46321 or to chrisyugolaw@gmail.com. Yugo's information is meant to be general in nature. Specific legal, tax, or insurance questions should be referred to your attorney, accountant or estate-planning specialist.

Copyright 2014 nwitimes.com. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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