bhm – I know this is a long one. I hope it answers all of your questions. I am happy to provide more clarification if needed.
I should have said “find out what your attorney would recommend” not “what your attorney would do”.
I am the executor of my father’s estate, but I hired an estate attorney to help me. (The one who prepared my father’s will) That particular attorney would not work with me in an hourly, consultation-only mode. Their office charges a percentage of the entire estate (including TOD accounts but excluding life insurance). These are the same assets that must be formally accounted and are taxed by the state of PA.
While I was/am technically still in charge, there were certain things it was “strongly suggested” I do the attorney’s way. For example, my parents had several hundred paper savings bonds that listed each other as the beneficiary. Since both of my parents are deceased, the savings bonds were part of the estate. Some of these were I Bonds earning decent interest rates. I wanted to find a fair way to divvy these up, but the attorney said it would be easiest to cash them all out, put the proceeds in the estate account, and pay the taxes from the estate account. Legally, that is the least risky way to divide the bonds in a fair way and it takes less time than figuring out how to divide and retitle them all. The logic made sense to me.
If accounts do not have designated beneficiaries, my attorney recommends the executor liquidate the account, put the money into the estate account, and pay the taxes from the estate. That protects the executor from legal action by other beneficiaries if stock markets drop. I suggest you ask your estate attorney how they would advise your daughter to proceed if your taxable and tax-deferred accounts listed the estate as the beneficiary. (And Vanguard may have their own rules for what they will do.)
Even though I am in charge as the executor, my attorney has Power of Attorney to represent me in certain transactions. They can act independently but they have always consulted with me before acting. In most cases I still do/did most of the work.
My attorney has a lot of experience and a good reputation. Their office used to provide hourly services for settling estates, but they claim they ended up spending a lot of time correcting things that clients did incorrectly. They prefer to provide guidance, have more control and make sure things are done correctly the first time. From speaking to friends who have served as executors, I understand more and more attorneys are using this model.
I recommend you ask your attorney what their office would do if your daughter came to them for help. Will they work with her on an hourly basis? Will they want to take charge and earn a percentage fee on the estate?
Explicitly ask your attorney “what will my daughter have to do if my son can not be located or will not cooperate”? Document this for her. The actions might be state specific.
And I hope that your daughter lives in the same state that you do. Some states require the executor to live in the same state. Some require out-of-state executors to hire representation within the state. Those are other questions you might need to ask.
One of the challenges I had was that my father had almost all of his accounts with TOD designations. There were bills to pay and I did not have access to funds (because of waiting on siblings). I ended up loaning about $15,000 to the estate to pay bills. I was reimbursed from the estate account once the house was sold. Make sure your daughter will have access to cash to pay bills. Life insurance is paid quickly with minimal hassle. Some people use joint checking accounts for this purpose.
Your son could make things difficult for your daughter. My brother was not uncooperative. His job was seriously restricting time off due to Covid and he could not make personal calls during business hours. On top of that, when he managed to take time off from work, he made several mistakes that required him to fill out forms more than once, make phone calls more than once, etc. Thankfully my sister-in-law was happy to do as much as she could to help.
If you name both of your children as beneficiaries on your IRA, they will both have to call in to Vanguard, prove their identity, and set up accounts before Vanguard will fund either of the inherited IRAs. I have no idea what process is required if one of the beneficiaries refuses to cooperate.
Also, if you are required to take an RMD on the year of your death, and have not done so prior to your death, your beneficiaries will be required to take your RMD the first year. One of the confusions for us was to figure out which beneficiary(ies) should take the RMD. If a beneficiary calls in to Vanguard to ask about the RMD, they will tell you the total amount that needs to be withdrawn from the inherited accounts. They can not tell any of the beneficiaries (even the executor) what any of the other beneficiaries have done, so unless you can speak with the other beneficiaries, you have no idea if anyone else has taken the RMD. I believe one of us took 1/4 of the required amount and the other three of us each took out the full RMD to be safe. That is another area where coordination was required.
Based on my very limited experience, separate accounts with single beneficiaries would allow your daughter to get access to her inherited accounts more quickly than having to coordinate with one or more other beneficiaries. Your estate attorney would know best.
One of the first duties as executor is to provide legal notification to all parties that have been named in the will. The law office took care of this for me. Your daughter will be required to provide legal notification to your son. If she does not have his address, she might need advice from a law office on how to handle this.
I can’t comment on taxes other than to say that neither Fidelity (inherited 401K) nor Vanguard (inherited IRA) provided good documentation to the beneficiaries on the rules for withdrawal from the tax-deferred inherited accounts.
Good luck! I hope this helps you prepare for your next meeting with your estate attorney.