Funds held in Estate 3 years

Funds held in Estate 3 years

Attorney Holding Estate Funds: My mother passed away leaving substantial assets. Most have been distributed but the home sale proceeds ($600,000) are being held in a low (or no) interest trust account. Her attorney says the money must be held for three years to get the benefit of the discount. Does this sound right?


If funds are being held for three years the prudent investor act in most states would require more than a no or low interest account. Rather an asset allocation reflecting the holding period, etc. would be likely required. So whatever the rest of the answer to your question is, inquire of the estate lawyer about changing the investments.

Not clear what or why this would have to be held. If an estate asset is comprised of a closely held business interest, FLP (family limited partnership) or LLC (limited liability company) on which discounts were taken for estate tax valuation purposes (see the Glossary; briefly, that the interests in the entity were not liquid and not marketable so that they should be valued lower then the pro-rata share of underlying assets) there is a rational to not liquidating these immediately as the liquidation would contradict the basis for the discounts claimed by the estate on the Form 706. However, what you've described is liquid assets, not an entity interest. Perhaps the estate attorney is wishing or recommending to hold funds until the likelihood of a tax audit is resolved. In that case, three years sounds quite long, and investing in the interim in a better manner may be acceptable.

Bottom line, you need to get more specific clarification from the attorney handling mom's estate. Get details as to what the rationale for the 3 years is, why no/low interest accounts are being used, and what is going on.

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