CA CA - Bob Harrod, 81, Orange County, 27 July 2009 - #12

[Cubby]

And on another note, what if bleeding the estate below the estate tax guidelines proves to be not in Mr. Harrod's best interest. Is it then a criminal issue rather than a civil issue?

But while Fontelle is home in Missouri preparing for her cross-country move, Bob disappears. At first, police believe he may have suffered a health problem typical of his age. But as time goes on and Bob isn't found, they begin to suspect foul play. It's not long until a strong motive surfaces: Bob is a millionaire.

http://investigation.discovery.com/t...bob-harrod.htm

Sometimes I wonder if the persons who went for control over the estate and possibly manipulated someone into doing something to Bob will be held responsible in the same way someone who sets up a robbery are held accountable for murder, even if they did not commit the actual murder the robbery victim.

There are a few cases here at WS where someone other than the person who committed the actual murder are being tried for murder. It will be really interesting to see how and where the cards fall in this case.

 

[zwiebel]

And on another note, what if bleeding the estate below the estate tax guidelines proves to be not in Mr. Harrod's best interest. Is it then a criminal issue rather than a civil issue?

But while Fontelle is home in Missouri preparing for her cross-country move, Bob disappears. At first, police believe he may have suffered a health problem typical of his age. But as time goes on and Bob isn't found, they begin to suspect foul play. It's not long until a strong motive surfaces: Bob is a millionaire.

http://investigation.discovery.com/t...bob-harrod.htm

Sometimes I wonder if the persons who went for control over the estate and possibly manipulated someone into doing something to Bob will be held responsible in the same way someone who sets up a robbery are held accountable for murder, even if they did not commit the actual murder the robbery victim.

There are a few cases here at WS where someone other than the person who committed the actual murder are being tried for murder. It will be really interesting to see how and where the cards fall in this case.

Aren't there also laws against profiting from crime, so any proceeds from that crime can be clawed back if people were proved to be involved somehow? I know we have it in England (brought in mainly for drug dealers/organized criminals) and I'm sure we got it from the US.

 

[zwiebel]

Quick question-what happens if the estate is bled to below the estate tax guidelines.

IIRC, the ByPass was established so that the assets of the surviving spouse would have a tax break. It was Georgia's 50%-the Survivors trust is Bob's 50%. Ideally, they are equivalent amounts....oh except for that pesky conservators account that was established at some point. So there are actually more vehicles out there holding Bob's hard earned assets than the two original.

From the IRS website:

‘Most relatively simple estates (cash, publicly traded securities, small amounts of other easily valued assets, and no special deductions or elections, or jointly held property) do not require the filing of an estate tax return. A filing is required for estates with combined gross assets and prior taxable gifts exceeding $1,500,000 in 2004 - 2005; $2,000,000 in 2006 - 2008; $3,500,000 for decedents dying in 2009; and $5,000,000 or more for decedent's dying in 2010 or later (note: there are special rules for decedents dying in 2010.)’

Looks like it will depend very much on when Bob is declared to have died, whether $3.5m or $5m will be the threshold above which, tax must be paid. Maximum estate tax rates for people dying in 2009 was 45 per cent, in 2010 it went down to 35 per cent.

In 2010/11/12 the exclusion amount for estates, gifts and generation skipping transfers was $5m. After 2012:

‘What will happen to the estate, gift, and generation-skipping transfer taxes after 2012?
The provisions of the 2010 Tax Relief Act sunset December 31, 2012. Therefore, under current law, the applicable exclusion amount will return to $1 million and the maximum tax rate will return to 55 percent.’

As far as I can see, as a non-native layman, the IRS doesn’t even seem to acknowledge the existence of the ‘I’ve already spent the money on conservators fees and can’t pay estate taxes’ argument. I can’t imagine it succeeding or anyone in this case making it, to be honest. I suppose it might be interesting to see if there is any pushing for a date of death to be declared as 2010 – that might hint the estate was over $5m.

Believe09, are you certain the Bypass and Survivor’s trusts were divided 50/50? I’ve read something that suggests that could be unwise from a tax viewpoint, especially down the line.

 

[Cubby]

Aren't there also laws against profiting from crime, so any proceeds from that crime can be clawed back if people where proved to be involved somehow? I know we have it in England (brought in mainly for drug dealers/organized criminals) and I'm sure we got it from the US.

Bars to Inheritance: Homicide, Abuse, or Abandonment

A person convicted of an intentional and felonious killing cannot inherit from his victim, which is based on the obvious equitable principle that a killer should not profit from his crime.

In most jurisdictions, if the killer has issue or descendents, then the killer's issue will inherit; however, a few jurisdictions, such as California, Rhode Island, and Virginia, have statutes that bar even the killer's issue to inherit.

This court decided that after Scott Peterson's conviction of the first-degree murder of his wife, Laci Peterson, and his unborn son, that, although the appeal of the murder conviction was still pending, California's Probate Code §254(b) only required a preponderance of the evidence of intentional and felonious killing. The court concluded that the murder conviction proved by the preponderance of the evidence that the killing was intentional and felonious. The burden of proof then fell on Scott Peterson to refute it, but he failed to do so. Hence, he was barred from receiving the proceeds of the $250,000 life insurance policy on his wife's life.

http://thismatter.com/money/wills-estates-trusts/bars-to-inheritance.htm

 

[zwiebel]

The only thing I don't like about that is it doesn't seem to include the spouse of a killer. So a killer could be barred from inheriting from a victim, and his or her children too, but then the spouse could get the money and share it with the children anyway.......surely not?

Obviously, if the spouse was implicated in any way, I guess they would be barred from inheriting too.

 

[believe09]

Did anyone settle on whether or not any of the money AH walked away from could be considered a gift and therefore taxable? In fact, since we know at least PB holds the key to the yellow sheet of loans listed (referencing BL trial) were there any unpaid loans on that list that might be considered gifts or income, and subject to taxes?

This is all way out of my league.

 

[Oriah]

This is some interesting stuff.

(Disclaimer- I am NO tax attorney or estate planner, but I do have access to both! And I need to call them, like now.)

As I understand it, if (while alive) you gift an amount to someone or something- even something like a portion of your own trust- then that $$ amount is taxable if it exceeds the amount allowed by your state/federal gov. Otherwise, it's considered a gift and therefore no tax. (Here, I believe it's up to $10,000 annually.) If it's property, I think you can 'gift' it up to a certain percentage of it's assessed value; that then equates to the same percentage of the annual gift? So for example if you gift a home to someone which is estimated to be worth $100,000 in 2012- you will be taxed on the $90,000 and the remaining $10,000 is tax free. I think? And then the new home owner is responsible only for the current and ongoing property taxes as long as they own the property.

If owner of property is deceased, and has left as a will or any part of a will- such as a codicil or whatever- that taxable amount comes out of the estate, according to the tax schedule of the estate at the time.

If the death of the individual is determined to be of unnatural causes, I think all bets are off.
I wonder if Mr. Harrod may have mistaken the loans that he provided from the trust properties as simply coming from the estate as a gift?

Yikes, we REALLY need a tax attorney here!

ETA: are the tax records from the various properties owned by either Mr. Harrod, Georgia Harrod, the Harrod Trust - do they rise and fall depending on purchase year?

 

[zwiebel]

Do you mean do the property taxes change Grainne? If so, as far as I can see, longterm owner occupier taxes are held to a max 2% rise a year, and they also have a $7,000 reduction in taxes. Properties are assessed annually but there is only a change in property taxes if there is a change of ownership or new construction - like for example, a theatre and games room perhaps?

So no, on the government website it doesn't look like property taxes go up and down, if that was your question. Unless you've just bought, sold or changed ownership on the property.

Isn't tax a horribly complicated subject that gets more complicated as soon as a person thinks they understand it a bit?

 

[zwiebel]

Did anyone settle on whether or not any of the money AH walked away from could be considered a gift and therefore taxable? In fact, since we know at least PB holds the key to the yellow sheet of loans listed (referencing BL trial) were there any unpaid loans on that list that might be considered gifts or income, and subject to taxes?

This is all way out of my league.

Someone's suggested some reading material for that, and I've been looking for an answer. Don't understand what I'm reading at the moment though.....

 

[zwiebel]

Just posting this financial bit from AH deposition because I think all the information about the amounts in question for that one of Bob's properties is there. It's just more math, so I'm going away with a paper and pencil.

Court Deposition. August 2011

June 15 1999 AH acquired Windflower Lane property for $270,000.
Used a loan from the Harrod Family Trust to acquire it, using a ‘short form deed of trust and assignment of rent.’ In the sum of $325,000.
Monthly repayments of ?? ‘Don’t recall’.
Duration of the deed of trust?? ‘Don’t recall.’
Bank for loan deposits?? ‘Don’t recall.’
Also short form deed of trust for $735,000 loan on the house. AH says grandfather had offered to refinance the house and had cash he wanted to invest.
What did AH do with the additional loan?
‘There were loans between these two. They weren’t involving my grandfather. This loan was paid off. This loan was started. The two were not connected.
I only received a portion of the money, and the money went to go pay…to pay off a loan that I had on the house.’
Your recollection of what the terms of the repayment where?
‘Yes. It was a 40 year loan, five per cent, and the payment was approximately…I don’t recall the exact amount, but it was approximately $3,800 a month, I think.’
Up until your grandfather’s disappearance, were you ever late or delinquent in paying this $3,800 a month?
‘Never.’
Up until July 2009 you made this monthly payment?
‘Yes’
And this payment would go to whom?
‘My grandfather’
In August 2009 you stopped making payments,correct?
‘Correct.’
Why was it?
‘Because my grandfather was missing.’

July 31st 2011 leaves Windflower Lane. Windflower transferred back to Harrod Trust, conservators PB and RB.

 

[shefner]

Can someone remind me when Bob's case will air on Disappeared?

 

[zwiebel]

Okay, I’ve had a go at the math, don’t laugh if I’ve made a really obvious mistake.
AH borrowed from Bob;
$325,000
$735,000
TOTAL BORROWED: $1,060000
AH was in possession of the House from June 1999 to July 2009. He paid;
$270,000 property purchase price
$456,000 rent (presuming his first repayment was July 1999 that’s $3,800 per month for 120 months)
TOTAL SPENT: $726,000

Deduct $726,000 spent from $1,060000 borrowed leaves;
PROFIT/GIFT: $334,000
Plus $95,000 unpaid rent/repayments
TOTAL PROFIT GIFT:$429,000

If the loan (which was over 40 years at 5 per cent) had an early repayment clause, AH’s amount borrowed would be higher. Doubt a family loan had that clause though.

ETA: Spotted a mistake already. AH stopped rent payments in August 2009 but didn't leave the house until July 2011. So that's another 25 months at $3,800 a month he owed, so add another $95,000 to his profit/gift. Have altered total above.

 

[zwiebel]

Can someone remind me when Bob's case will air on Disappeared?

No, but we'd all love to know! It's on Season Five, showing now, so we are hoping for a December airing but they haven't set a date yet.

 

[believe09]

Great timeline, zwiebel. AH quitclaimed the property back to the trust in April of 2012 however. I *think* this makes him libel for all of the payments in between.

So-lets add some mortgage payments to the unpaid ones.

I am going to bang the drum again that we have all been banging-Bob wasnt there to sign the quitclaim. I find the fact that the co conservators signed on behalf of him to be very very fishy. How is this legal at all? Regardless of what the two parties promised each other, (why else make the backroom deal unless there was mutual benefit?) how can it be done without approval of all interested parties including Mrs Harrod?

gitana1, wheeerrrreeee are you?

 

[zwiebel]

Gift Tax Annual Exclusion;
1998-2001........$10,000
2002-2005........$11,000
2006-2008........$12,000
2009-2012........$13,000

So I think that makes a maximum of $123,000 that Bob could have gifted to AH between 1999 and 2009. Take that away from the total gift which appears to be $429,000, that leaves;
TOTAL $306,000 which gift tax should have been payable on, maybe. I think though, it would have been the responsibility of Bob or his estate to pay that, not AH?

ETA; with extra mortgage payments mentioned by believe, TOTAL $340,200 which gift tax should have been payable on.

No good asking me, really. In Germany the IRS just takes what it believes you owe straight from your bank. You have to argue about it after the money's gone, if you think they made a mistake....and if they have emptied your account by mistake and it has gone overdrawn, the bank is likely to close your account for a year as punishment.

 

[zwiebel]

Oh, rip that all up and start again. Spouses can EACH give a gift of $13,000 (or whatever it was in that year). So Bob and Georgia from 1999-2008 (Georgia's death) could have each been gifting Andrew.

I am not recalculating, however, because I have also just read the gift is not cumulative. It cannot be carried over to the next year. So if Bob didn't gift AH those payments in those years, it doesn't count. And he obviously didn't because he was taking the payments. So tax is payable on the lot. And it isn't AH who has to pay, it is the donor. So, Bob's estate; conservators of which, PB and RB.

I am not pretending to be an expert here, am just reading the IRS website and that clever Estate planning lawyer I linked earlier.

ETA; Gift Tax rate starts at 18% to a maximum of 35%.
If average rate is say, 25%, then that is 25% of $429,000. Which is $107,250 tax payable. I think.

 

[zwiebel]

Just to add, in my opinion, if the $429,000 amount is anywhere near correct, that would be a very large amount for conservators of an estate to take as a loss. They have a duty of care to conserve the estate. The clue is in their title.

 

[zwiebel]

So, onto the next thing now. It looks like Bob may have refinanced one of his other houses at some point. Or opened up a mortgage on it for someone else. So does that mean he did it in the same way as AH, lending out a large cash sum and accepting rent payments for a set period in return, with interest?

If so, I wonder if those repayments were kept up while Bob was missing. And if those repayments stopped, does it mean any cash sum should also be counted as a gift? And I wonder if there are any other house loans/mortgages or deed of trusts out there that Bob might have made before he died?

 

[shefner]

Let me tell ya, Bob Harrod has some devoted people over here on his thread! I admire your tenacity and endurance.

I don't follow as closely as the rest of you but I do lurk here and try to keep up. Praying for justice....for Bob.

 

[zwiebel]

I've checked the ID TV schedule up to Dec 24th. Not there I'm afraid. Looks like no airing of Bob's case before Christmas.