This is a tricky situation...
I have a friend who lives in Minnesota and her mother is dying of cancer. The mother has limited assets: a car and condo - both of which are set up as "transfer upon death" to her two children.
The mother does have a 401k which, at one time, had about $200,000 in it. That account is also set up as a POD to her two children. All that is left is a checking account with enough in it to pay the bills as they come due. Her mom has been taking money out of her 401k to pay her medical bills and to give money to the two kids. It sounds like she is not having any state or federal funds withheld.
This is where it gets tricky: Basically everything in the estate is either POD or TOD and a ton of money was taken out by the mother over the past month. My friend is the "executor to be" so I told her I would ask on here.
There is not enough left for this estate to even go to probate but there is going to be a ton of money due to the IRS because of everything the mom took out of her 401k while she is still alive. Whatever (if anything) left in the 401k account is payable upon death so it skips probate.
Who is responsible for taxes in this instance? Any help would be appreciated. I told my friend she needs to talk to an attorney because there is also a ton of credit card debt.
