Ask Terry Questions Estate distribution (Terry says Ripoff!)

Estate distribution (Terry says Ripoff!)

By Terry Savage on January 26, 2024 | Wild Card

My parents had a Merrill Lynch Edge CMA account. My father passed in 2016 and my mother passed this past Thanksgiving. The account is setup as TOD with my siblings (6 of us) as beneficiaries. The account has muni bonds, a few stocks and a few money market funds. Very conservative. ML has been in contact with each of us and has given us two choices for disbursement of the funds. Do a direct transfer to an outside brokerage account or create a new ML CMA account under our names. Then they will populate the account in like funds. At that point we can do what we want, which my plan is to xfer those funds to my personal outside brokerage account. At that point my FP will suggest what we do with it. That all said, I’m trying to find out what my tax liability will be. There seems to be some confusion. ML says there will be no taxes. My advisor thinks no taxes until it’s in my personal account with her and when we sell. At this point I believe due to the muni funds we’re at a loss. My tax advisor thinks I’ll get a K1 for my 2024 taxes. I’m really confused. The account value before the split is about $450k so we’re well under any estate taxes. What is your thoughts on how this all should work ? I’m not sure if state makes a difference, the account was created in Illinois and I live in Michigan. Would there be state taxes also?

Thanks in advance,

Terry Says

I think they just want to hang on to your money — and make some hidden commissions on purchase in the new accounts! That’s the Savage Truth.

If it were my family, I would tell them to just LIQUIDATE the account, and distribute each person’s share so they can do what they want with the CASH!
There will be NO TAXES if you do that now, because of the “step-up” in value, which means your new cost basis is the value of the shares on the date of death. So if your mother passed late in the year, use your December 31st statement of her account as your new cost basis.

Immediately give instructions to execute the sale of ALL assets — and don’t look back. They probably aren’t appropriately invested for you and your siblings anyway, if they were right for your elderly mother!

Each of you can then make a personal decision. Pay off debt, send a child to college, or open their new low-cost investment account at Fidelity or Vanguard and pay a lot less in fees!

And PS if nobody told you about this, then get rid of your advisors and get new ones!



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