Before I became a CPA, I’d heard every family should have an accountant in it. I didn’t realize how important that was until my oldest brother passed away suddenly in 2009.
Geoff died without a will. He had no children, no ex-wives, no current girlfriend and no pets. By unanimous family decision, my brother John and I were named as co-executors of his estate. John, who had handled the affairs for our parents, took care of the legal matters, and I took care of the tax and financial matters.
First, we had to figure out what he had and what he owed and then decide what to do with everything.
Geoff had simple needs and had recently retired from a hard life of building houses in the mountains of northern New Mexico, where winter temperatures routinely dropped below zero. Summers were rarely over 70, and he started scraping his windshield before work in mid-August. His odd house — which the previous owner had built by gradually adding rooms to a single-room cabin — was paid for. He didn’t use credit cards, and he didn’t have any debt. He had a nice nest egg set aside and a couple of retirement accounts.
As John and I gathered the paperwork for his assortment of retirement accounts, we found the beneficiary designations were inconsistent. Some accounts named just John, while others named him and me. None of them named all five of us remaining siblings.
John and I could have taken the bulk of his money and left the others out, but we figured Geoff had named us as beneficiaries because he trusted us to do the right thing. Without a will to guide us, we reasoned he would have wanted us to be fair to his four brothers and one sister. Geoff was a generous man, incapable of holding grudges, so we figured he would have wanted his money split evenly between his surviving siblings, even if he hadn’t documented that in any way.
Taking lump-sum distributions on all his retirement accounts meant a sizable tax hit for John and myself (which the estate reimbursed us for), but it was worth it to be fair to the others.
One of the retirement accounts was a Roth IRA, but when John received the 1099-R, it was coded as a taxable distribution. I recalled conversations with Geoff maybe a decade earlier, before I was a CPA, when his investment advisor pushed him to recharacterize part of a traditional IRA over time. Sure enough, when I dug through his neatly filed tax documents — a habit our parents had taught us — I found proof that the 1099-R was wrong and the distribution should have been coded as tax-free. John contacted the broker and got the form corrected.
A few months before my brother died, I had spoken with him on the phone. It was March, and I was buried in tax work. He told me he’d gotten an IRS notice, and even though he was sure he didn’t owe more money, it was easier for him to just write a check for $5,000 than to figure it out. “Send me your documents so I can fix it,” I implored. “That’s what I do!”
But, for whatever reason, he never got around to sending me those papers, and I got too busy with work, family and home to make the long drive north to pay him a visit.
As we went through Geoff’s house, I remembered my conversation about the IRS notice and managed to find all the documents for that tax return.
Sure enough, he’d left some stock sales and a few other small items off the return, so of course, the IRS wanted him to pay tax on the full proceeds of those sales. The 1099 for that year showed he had a small loss. I amended that return and got back almost all of the $5,000 payment for the estate. Without a CPA in the family, my brothers most likely would not have bothered to fight the IRS.
Then there was the matter of the house and what to do with it. His best friend Maria, who had been his girlfriend years before and with whom he had originally bought the house, told us that it had been his intention for her to have it should anything happen to him. Geoff’s long-time former employer, who we all knew well, confirmed this.
The residence, as I already mentioned, had an odd arrangement of rooms. The single, large bedroom had no doors, but it had two doorways leading to the kitchen and living room. Only the bathroom had an actual interior door. At the very center of the house was a tiny room with doorways leading to the kitchen and a hallway that went into the living room. Geoff put his refrigerator in the kitchen doorway and used the rest for storage.
As odd as the floorplan was, Geoff had put a great deal of effort into making it a nice place to live. He’d replaced all the windows, many of which had previously just been big panes of glass. He rewired it to bring it up to code. He ripped up the moldy carpet in the bedroom and sanded and varnished the pine floorboards hidden underneath. A new, high-efficiency, wood-burning stove in the living room kept the house toasty, even in the coldest weather.
This was the height of the housing crisis in New Mexico. We couldn’t imagine anyone wanting to buy an oddly configured home on a triangular lot in an impoverished community anytime soon. We figured that, at most, we might each get an additional $10,000 from the sale, hardly a life-changing amount.
Maria, on the other hand, just managed to scrape by with an assortment of part-time jobs. She cleaned rooms at a local hotel. In winters, she worked in the rental shop at the local ski area. She had been an EMT. Sometimes, she helped older residents clear brush or chop wood. Maria was one of the toughest women I’d ever met. For a few years, she had lived on an island in Alaska, where she commuted to work by boat. There was almost no physical job she couldn’t do.
Maria had been a fixture in Geoff’s life for decades, and we knew her well. We knew that having a place to live would change her life. So we made her part of Geoff’s estate and gave her his house. We knew our brother, who would give anyone in need the shirt off his back, would have approved.
To this day, I’m grateful I was able to use my CPA superpowers to help my family and Maria in a difficult time. Because I could decipher the tax documents and take care of all the needed filings, I knew I could put my brothers at ease that those matters had been taken care of. We were also blessed as a family that we were able to resolve our Geoff’s estate without any disputes.
Liz Farr, CPA, spent 15 years in tax and accounting at small firms in Albuquerque, NM. Besides tax returns of all flavors, she worked on audits of governmental entities and not-for-profits, business valuations, and litigation support. Now she's a full-time freelance writer specializing in content marketing for accountants and bookkeepers around...