Through a major estate battle and final agreed upon mediation I was to receive the “first 20k” out of suspense from Phillips 66. The transfer of heirship occured and everything was transferred to a family member. This, creating the “suspense” funds going directly to him, in his name. In which to me drops the fact they were royalties. At any rate he is withholding my $20k until I pay taxes to him or for him which I believe is incorrect. There are three attorneys involved and they don’t have answers. Has this happened to anyone on here? They want me to put funds in a made up escrow account to pay at the end of the year. However, my brother accepted the check and deposited it. So to me it’s not royalties. I’ve talked to a couple of people that suggested he report that he received the money as like a trustee or passthrough. And he would notify the IRS that 20k was given to me. What a mess. Any suggestions??
Suspense funds would be royalties and someone has to report the income and pay taxes. The oil company will naturally send the funds to the owner of record title, which in this case is your brother. They cannot send the royalties to a third party. The settlement agreement should have addressed the payment of taxes. If your marginal tax rate is lower than your brother’s then you would be better off recognizing the income on your return and paying the taxes yourself. A CPA would be the best advisor on how to accomplish this for IRS purposes, perhaps with your brother sending you a 1099-misc with the income set out. There may be an added complication if the funds are from a state such as OK or NM and state income taxes were withheld.
Thank you for the information you provided. Would you know if it was legal for him to hold taxes out of the money that I am due? At this point he’s received the funds, and will be paying me directly. I mentioned the 1099 misc and was told no I had to put the money in an escrow account with my brother “which is not a trustworthy person” to pay my taxes on what he received.
Your attorney needs to address this with his attorney.
I agree with Tennis. But ask yourself if you are in the same tax bracket as your brother. Example is if he is in a higher tax bracket than you then you would be helping him pay his taxes. How would you recoup your overpayment? Again, talk to your attorney & accountant.
Thank you, but he tried to quit me along time ago and the judge assigned to the estate denied it and forced him to stay throughout mediation. He refuses to assist me now. The mediator that was assigned refuses to help without another round of mediation to force the mediation he saw over to begin with it’s a horrible joke. I’m in Texas, you know if any good attorneys??..lol
I truly appreciate your explanation of the process. I will keep fighting for my rights.
It’s hard when you can choose your friends but not your family. Greed after death is crazy!!