Another possibility is to have a member "buyout" the deceased member's account. The member buying the account out pays cash to the club then gets the deceased units
That way there would be no stock sales and cash to the estate.
Subject:RE: [club_cafe] Withdrawal of a Deceased Member
The withdrawal does not necessarily occur on the date of death, although youcould back-date it to the date of death. That is why I suggested getting avalue on the date of death for the estate. When I said "somebody", I meanteither the treasurer or president of the club - some
one with full access toBivio.I do not know if a stepped up basis is used when the estate is processingthe "sale" of the units.Linda-----Original Message-----From: club_cafe@bivio.com [mailto:club_cafe@bivio.com] On Behalf Of LenDouglassSent: Sunday, September 11, 2016 1:43 PMTo: club_cafe@bivio.comSubject: RE: [club_cafe] Withdrawal of a Deceased MemberWith all due respect to Linda, I can't agree with the last sentence. Whenyour treasurer processes a withdrawal in Bivio they will be generating awithdrawal report that identifies the member's basis before withdrawal, thecurrent Income Allocation, and calculates the members adjusted basis on thewithdrawal date [which should be the date of death]. Then it calculates theGain/(loss) to be reported to the IRS. A copy of the withdrawal reportshould be included with the check
. When the treasurer prepares the 1065Club Tax Return at the end of the year a K1 for the deceased member will beincluded along with a potentially adjusted Withdrawal Report to be furnishedto the executor of the estate along with the K1 Partnership Report. Having "SOMEONE" get involved in the process I would strongly object too!That could be totally confusing and could cause issues with the IRS over theestate tax return if the information provided by "SOMEONE" is incorrect.Let the treasurer perform their duties! [isn't that why you pay them the bigbucks, GRIN].Len Douglass-----Original Message-----From: club_cafe@bivio.com [mailto:club_cafe@bivio.com] On Behalf Of LindaWiltseSent: Saturday, September 10, 2016 9:59 PMTo: club_cafe@bivio.comSubject: RE: [club_cafe] Withdrawal of a Deceased MemberIn a perfect world the deceased member's executor sh
ould set up an accounttitled something like "Estate of John Smith" with a federal ID # and a checkshould be written to the estate. That is simpler than transferring stock.Someone with access to Bivio should also provide the executor with the unitvalue times the # of shares on the date of death so that there is a basisfor any gain as of the withdrawal date.Linda Wiltse-----Original Message-----From: club_cafe@bivio.com [mailto:club_cafe@bivio.com] On Behalf Of Jan MPeterson TteeSent: Saturday, September 10, 2016 5:16 PMTo: club_cafe@bivio.comSubject: [club_cafe] Withdrawal of a Deceased MemberAfter one of our members passed away back in April, our club selected astock to transfer to his brokerage account in accordance with ourpartnership agreement. When we attempted to coordinate the trans
fer, hisbroker told us that the executor must open an estate account in the name ofthe deceased before we can make the transfer. His executor (his son) onlyreplied once to an email message saying he will get back to us. We have noaddress except for the deceased member. What have other clubs done when anexecutor fails to cooperate? How long can we have a pending withdrawal onour books before we must take some alternative action and what action shouldwe take? Will we have trouble with our K-1s if this transaction is notconcluded by the end of the year? My best guess is that as a practicalmatter we must rescind our withdrawal plan and mail a check payable to theestate to the address of the deceased member before the end of the year.Our club is organized as a general partnership in the State of California.---This email has been checked for viruses by Avast antivirus software.https://www.avast.com/ant
ivirus
Robert Mann on
Tim,
there is no such thing as a "buyout" of a deceased member's account, unless you meant that someone makes an investment into the club equal to the deceased's account so that the club has cash available to pay the estate.
Bob Mann
Lunch Money Investment Club
On September 11, 2016 at 4:41 PM "tim@timhoyman.com" <tim@timhoyman.com> wrote:
Another possibility is to have a member "buyout" the deceased member's account. The member buying the account out pays cash to the club then gets the deceased units
That way there would be no stock sales and cash to the estate.
Tim Hoyman, Colorado Leprechauns
Sent from my Verizon 4G LTE Smartphone
------ Original message------
From: Linda Wiltse<wiltse@optonline.net< wiltse@optonline.net="">>
Subject:RE: [club_cafe] Withdrawal of a Deceased Member
The withdrawal does not necessarily occur on the date of death, although youcould back-date it to the date of death. That is why I suggested getting avalue on the date of death for the estate. When I said "somebody", I meanteither the treasurer or president of the club - some
one with full access toBivio.I do not know if a stepped up basis is used when the estate is processingthe "sale" of the units.Linda-----Original Message-----From: club_cafe@bivio.com [mailto:club_cafe@bivio.com] On Behalf Of LenDouglassSent: Sunday, September 11, 2016 1:43 PMTo: club_cafe@bivio.comSubject: RE: [club_cafe] Withdrawal of a Deceased MemberWith all due respect to Linda, I can't agree with the last sentence. Whenyour treasurer processes a withdrawal in Bivio they will be generating awithdrawal report that identifies the member's basis before withdrawal, thecurrent Income Allocation, and calculates the members adjusted basis on thewithdrawal date [which should be the date of death]. Then it calculates theGain/(loss) to be reported to the IRS. A copy of the withdrawal reportshould be included with the check
. When the treasurer prepares the 1065Club Tax Return at the end of the year a K1 for the deceased member will beincluded along with a potentially adjusted Withdrawal Report to be furnishedto the executor of the estate along with the K1 Partnership Report. Having "SOMEONE" get involved in the process I would strongly object too!That could be totally confusing and could cause issues with the IRS over theestate tax return if the information provided by "SOMEONE" is incorrect.Let the treasurer perform their duties! [isn't that why you pay them the bigbucks, GRIN].Len Douglass-----Original Message-----From: club_cafe@bivio.com [mailto:club_cafe@bivio.com] On Behalf Of LindaWiltseSent: Saturday, September 10, 2016 9:59 PMTo: club_cafe@bivio.comSubject: RE: [club_cafe] Withdrawal of a Deceased MemberIn a perfect world the deceased member's executor sh
ould set up an accounttitled something like "Estate of John Smith" with a federal ID # and a checkshould be written to the estate. That is simpler than transferring stock.Someone with access to Bivio should also provide the executor with the unitvalue times the # of shares on the date of death so that there is a basisfor any gain as of the withdrawal date.Linda Wiltse-----Original Message-----From: club_cafe@bivio.com [mailto:club_cafe@bivio.com] On Behalf Of Jan MPeterson TteeSent: Saturday, September 10, 2016 5:16 PMTo: club_cafe@bivio.comSubject: [club_cafe] Withdrawal of a Deceased MemberAfter one of our members passed away back in April, our club selected astock to transfer to his brokerage account in accordance with ourpartnership agreement. When we attempted to coordinate the trans
fer, hisbroker told us that the executor must open an estate account in the name ofthe deceased before we can make the transfer. His executor (his son) onlyreplied once to an email message saying he will get back to us. We have noaddress except for the deceased member. What have other clubs done when anexecutor fails to cooperate? How long can we have a pending withdrawal onour books before we must take some alternative action and what action shouldwe take? Will we have trouble with our K-1s if this transaction is notconcluded by the end of the year? My best guess is that as a practicalmatter we must rescind our withdrawal plan and mail a check payable to theestate to the address of the deceased member before the end of the year.Our club is organized as a general partnership in the State of California.---This email has been checked for viruses by Avast antivirus software.https://www.avast.com/ant
ivirus
Linda Glein on
Hopefully Ira or one of the other long-time experts will
jump in again soon, but two 'terms' recently used need
clarification:
Buyout -- this term should be banished. Never to be used
again. Unless a club has chosen a PA dissimilar to the
traditional examples, members at any time can put in
additional funds to buy units as long as no one member
exceeds a stated % of the partnership. This would provide
cash to be used in the case of a departure of any kind. But,
remember that many clubs have large portfolios, and an
individual member may have investments totaling tens of
thousands of dollars, so it might be difficult for club
members to pony up that much. (Note that 'buyout' implies
that one member pays another member directly. This is not an
advisable procedure.)
Withdrawal (date) -- what you are really interested in is
the Valuation Date. The traditional PA basically addresses
three dates: Withdrawal date, valuation Date and Payout
Date. Usually the Withdrawal Date is the meeting date
immediately following the notice of withdrawal (or notice of
death date). The Valuation Date traditionally is the Meeting
Date (or as stated in the PA) following the Withdrawal Date.
And the Payout Deadline Date is usually 30 or 60 days
following the Valuation Date.
Of coursed the PA may define any of these dates differently.
But the general idea is: A person sends in a notice of
withdrawal which is noted at the next meeting. To avoid
people trying to 'time' their valuation to market moves, the
Valuation date is about one month later. The Valuation Date
determines the market value of a member's holdings to be
distributed and their cost basis. The partners then have
enough time ( a month or two) to determine how to fund the
payout to the departed member. If the funds are readily
available, there is no need to wait until the deadline.
Ira, Bill, Len, and others, did I describe that about right?
Any corrections?
ira smilovitz on
I think Linda did a good job with buyout (yes, it should be banished from the vocabulary) and withdrawal date.
I generally would oppose providing a date of death valuation to the executor because the rules for determining the value on the date of death aren't as simple as you might think. The value would only be exactly equal to the member status report value on the date of death if that date were a date on which the club would regularly calculate its unit value. If the date of death falls between two "official" valuation dates, the valuation for estate purposes is the weighted average of the values on the two closest valuation dates. This is something the executor will know (or will learn) how to determine and isn't the responsibility of the club's treasurer.
Hopefully Ira or one of the other long-time experts will
jump in again soon, but two 'terms' recently used need
clarification:
Buyout -- this term should be banished. Never to be used
again. Unless a club has chosen a PA dissimilar to the
traditional examples, members at any time can put in
additional funds to buy units as long as no one member
exceeds a stated % of the partnership. This would provide
cash to be used in the case of a departure of any kind. But,
remember that many clubs have large portfolios, and an
individual member may have investments totaling tens of
thousands of dollars, so it might be difficult for club
members to pony up that much. (Note that 'buyout' implies
that one member pays another member directly. This is not an
advisable procedure.)
Withdrawal (date) -- what you are really interested in is
the Valuation Date. The traditional PA basically addresses
three dates: Withdrawal date, valuation Date and Payout
Date. Usually the Withdrawal Date is the meeting date
immediately following the notice of withdrawal (or notice of
death date). The Valuation Date traditionally is the Meeting
Date (or as stated in the PA) following the Withdrawal Date.
And the Payout Deadline Date is usually 30 or 60 days
following the Valuation Date.
Of coursed the PA may define any of these dates differently.
But the general idea is: A person sends in a notice of
withdrawal which is noted at the next meeting. To avoid
people trying to 'time' their valuation to market moves, the
Valuation date is about one month later. The Valuation Date
determines the market value of a member's holdings to be
distributed and their cost basis. The partners then have
enough time ( a month or two) to determine how to fund the
payout to the departed member. If the funds are readily
available, there is no need to wait until the deadline.
Ira, Bill, Len, and others, did I describe that about right?
Any corrections?
Laurie Frederiksen on
I want to reinforce what Ira has just described. Your partnership agreement probably describes how an estate should be paid out if a member passes away. Those are the only instructions you should be following for paying out what the estate is owed.
In all the recommended agreements, for club purposes, the actual date of death is only used to establish a date of notification of intent to withdraw. It is not used as the date to value what the estate is owed.
I'd also like to reinforce the fact that if you are going to transfer stocks to pay any withdrawal, you should do it as close to the valuation date as possible and use the stock valuations on the valuation date to determine how many shares to transfer.
Waiting to transfer stocks or selecting shares using a different valuation date from the withdrawal valuation date creates endless issues for clubs, many of which can be difficult or impossible to fix.
Save yourself some headaches and keep things simple!
Laurie Frederiksen Invest with your friends! www.bivio.com