Make accounts payable on death

[disneysteve]

I've learned a number of things going through the estate process. I may summarize them at some point but one big one is making sure accounts are titled to make things as easy as possible for your heirs.

1. If an account can have a beneficiary, make sure it does. Traditional IRA, Roth, 401k, insurance policies, etc.

2. If an account can't have a beneficiary, there are a couple of options.
a) You can establish a revocable living trust. I don't know all the details but that allows asset to bypass probate and go directly to the beneficiary.
b) You can title your accounts "Payable on Death" (POD) which is essentially the same as designating a beneficiary. This is also called a Totten trust.
Option "a" requires you to hire a lawyer and spend money to establish the trust.
Option "b" is free. Just go to your bank and re-title the account. I'm sure there's some basic paperwork involved.

My cousin had neither 1 nor 2. That increased the legal fees I'm paying the attorney to handle the probate process. It has meant I've had to go through the process of contacting/visiting each bank, present a death certificate, present the court-issued Letters of Administration designating me as the Personal Representative for the estate, and then have the funds paid to the estate. I then send those checks to the estate account we had to establish where the funds will remain until the probate process is completed in a few months. Only then will I actually gain access to the money. With 1 or 2 above, I'd already have the money and be done.

Had I known all of this, I would have talked to my cousin about changing his accounts to POD when I was with him back in February. It would have made the whole process much quicker, easier, and cheaper.

There is another option which is to make accounts joint with your beneficiary, but that's a less desirable because it gives the person access to the money while you're still alive. With POD they have no access until you die.

[QuarterMillionMan]

1) did you have to open a new estate account in order to transfer the funds from your cousin's account into the estate account?
2) being that your cousin didn't have a revocable living trust, what document (ie, a will, power of attorney, etc.) did your cousin have that named yourself as the executor?

[Scallywag]

I have heard of something similar called "Former or Survivor". This is essentially the same as "Payable On Death" where the "Former" is the a/c holder, and the "Survivor" is the beneficiary.

I hear you about not allowing a beneficiary access until but that depends on how much trust you have on that person. Also, I think it depends on how many beneficiaries you have. If there's only the one beneficiary per a/c, then does it matter if s/he has access to your a/cs, while you're still living?

[disneysteve]

1) did you have to open a new estate account in order to transfer the funds from your cousin's account into the estate account?

Yes.

2) being that your cousin didn't have a revocable living trust, what document (ie, a will, power of attorney, etc.) did your cousin have that named yourself as the executor?

He had a will that named me executor (personal representative is apparently the actual legal term).

[Like2Plan]

I've learned a number of things going through the estate process. I may summarize them at some point but one big one is making sure accounts are titled to make things as easy as possible for your heirs.

1. If an account can have a beneficiary, make sure it does. Traditional IRA, Roth, 401k, insurance policies, etc.

2. If an account can't have a beneficiary, there are a couple of options.
a) You can establish a revocable living trust. I don't know all the details but that allows asset to bypass probate and go directly to the beneficiary.
b) You can title your accounts "Payable on Death" (POD) which is essentially the same as designating a beneficiary. This is also called a Totten trust.
Option "a" requires you to hire a lawyer and spend money to establish the trust.
Option "b" is free. Just go to your bank and re-title the account. I'm sure there's some basic paperwork involved.

My cousin had neither 1 nor 2. That increased the legal fees I'm paying the attorney to handle the probate process. It has meant I've had to go through the process of contacting/visiting each bank, present a death certificate, present the court-issued Letters of Administration designating me as the Personal Representative for the estate, and then have the funds paid to the estate. I then send those checks to the estate account we had to establish where the funds will remain until the probate process is completed in a few months. Only then will I actually gain access to the money. With 1 or 2 above, I'd already have the money and be done.

Had I known all of this, I would have talked to my cousin about changing his accounts to POD when I was with him back in February. It would have made the whole process much quicker, easier, and cheaper.

There is another option which is to make accounts joint with your beneficiary, but that's a less desirable because it gives the person access to the money while you're still alive. With POD they have no access until you die.

We did "b" for some shares of stock DH had-the shares were from a DRIP stock. It required getting a gold medallion signature and filling out some paperwork (and a small fee, I think it was $5.00 or $10.00). I found out subsequent to that that we could just transfer the shares to a brokerage account and designate a beneficiary (and contingent beneficiaries) for the whole account for free. But, once you set up the the TOD (transfer on death in this case) it stays with the shares (until you re-title) .

Another thing we are in the process of doing is a transfer on death deed for our primary residence (but, not all states have this). This would come into play if both DH and I passed away. We only have one heir and it would save him having to put the house through probate (plus there is a tax that is applied to everything that has to go through probate, so it would save him some $$).

There is another problem with making accounts joint besides what you have already pointed out- it leaves the assets vulnerable to lawsuits (and creditor claims and potential divorce settlements) that the beneficiary might be at risk. And, if it is an asset that would have a capital gain--a beneficiary might miss out on part of the stepped up basis. (It depends on the state--and there are different rules for spouses. But, a non spouse might only get part of the stepped up basis)

[disneysteve]

I hear you about not allowing a beneficiary access until but that depends on how much trust you have on that person. Also, I think it depends on how many beneficiaries you have. If there's only the one beneficiary per a/c, then does it matter if s/he has access to your a/cs, while you're still living?

One problem with making an account joint with your heir has nothing to do with them. Let's say my mom makes me joint owner of her accounts since I'm the only beneficiary. If something then happens to me, she is considered to be inheriting the money from me, when the intent was just the opposite. That could create tax issues for her even though it's really her own money. It could also be a problem if I were to get sued for some reason and they go after those assets.

Trust is obviously the other concern. Just because you are leaving money to someone doesn't necessarily mean you want them to have unrestricted access to that money while you're still alive.

[disneysteve]

if it is an asset that would have a capital gain--a beneficiary might miss out on part of the stepped up basis.

Another good point (we were posting at the same time).

[corn18]

This is a timely thread. My MIL is not doing well. She has my wife set up as a joint owner on her checking and savings accounts. Never thought about the implications of my wife dies first. Will have to think about that.

she does have a revocable trust and has all her investments in that. Wife is co-executor with her nephew. So that should be fairly straight forward. She doesn’t own a house because she’s in a CCRC but she does get her deposit back when she dies. I wonder if she has a beneficiary designated for that?

[disneysteve]

she does get her deposit back when she dies. I wonder if she has a beneficiary designated for that?

Probably not. "Little" things like that are the stuff that complicate settling an estate. For example, I cancelled my cousin's auto insurance, so there was a premium refund. That had to go into the estate account. When I cancel his homeowners policy, the same thing will happen. Even if you have a trust and title all accounts ideally, there will still be unaccounted for money that needs to get handled properly after death. The goal should be to get all of the big stuff nailed down as much as possible.

[Scallywag]

There is another problem with making accounts joint besides what you have already pointed out- it leaves the assets vulnerable to lawsuits (and creditor claims and potential divorce settlements) that the beneficiary might be at risk. And, if it is an asset that would have a capital gain--a beneficiary might miss out on part of the stepped up basis. (It depends on the state--and there are different rules for spouses. But, a non spouse might only get part of the stepped up basis)

One problem with making an account joint with your heir has nothing to do with them. Let's say my mom makes me joint owner of her accounts since I'm the only beneficiary. If something then happens to me, she is considered to be inheriting the money from me, when the intent was just the opposite. That could create tax issues for her even though it's really her own money. It could also be a problem if I were to get sued for some reason and they go after those assets.

Where can I find the law on this?

I thought this happened only if you recieved "new money" that you did not have access to, previously. For example, our bank a/cs are funded fully by my DH but I am a joint holder in all. If I died, would this trigger "taxes" for him, even though he was funding the a/c with his paycheck? That makes no sense, even if he died first and I was the survivor?

Similarly, I have a joint a/c from decades ago (when I was a teen) with my mother that I've been contributing to even though I'm not on speaking terms with her. She's obviously older and if she goes first, I end up paying taxes on it? Wow!

So why would anyone even have joint a/cs if this were the case? What's the point of banks offering them, then?

[LivingAlmostLarge]

How does the trusts works exactly? If it is a married couple does it need to be revised upon death of one?

[disneysteve]

I thought this happened only if you recieved "new money" that you did not have access to, previously. For example, our bank a/cs are funded fully by my DH but I am a joint holder in all. If I died, would this trigger "taxes" for him, even though he was funding the a/c with his paycheck? That makes no sense, even if he died first and I was the survivor?

It's not an issue for spouses since all assets automatically pass to the surviving spouse upon death of the first spouse. Although even with a spouse there can be issues that arise with joint accounts.

It's more of a potential issue when you have a joint account with someone other than your spouse.

Here's one article from Kiplingers that talks about it. https://www.kiplinger.com/article/re...t-in-case.html

[Scallywag]

It's not an issue for spouses since all assets automatically pass to the surviving spouse upon death of the first spouse. Although even with a spouse there can be issues that arise with joint accounts.

It's more of a potential issue when you have a joint account with someone other than your spouse.

Here's one article from Kiplingers that talks about it. https://www.kiplinger.com/article/re...t-in-case.html

That's seriously just f-ed up. Now I have to figure out how to get my money out of my joint a/c with my mother. FML.

[disneysteve]

Now I have to figure out how to get my money out of my joint a/c with my mother. FML.

You definitely should, especially if you're not on good terms with her. There's nothing stopping her from draining that account at any time. Not saying she would, but she could and you'd have no recourse because legally it's her money every bit as much as it is yours. Also, is it your desire for that money to go to her if you were to die?

[Scallywag]

You definitely should, especially if you're not on good terms with her. There's nothing stopping her from draining that account at any time. Not saying she would, but she could and you'd have no recourse because legally it's her money every bit as much as it is yours. Also, is it your desire for that money to go to her if you were to die?

Off topic, but she's the one pissed with me, while I still crave a good relationship with her. But no matter how bad things get between us, she would not drain the a/c because (a) my parents are millionaires and don't need money from me and (b) she is my mother!

I liked having the joint a/c because it was opened and domiciled in a very very tax and debtor friendly state and now I have to move it to CA, which is neither.

Ugh.

Had I predeceased her without knowimg this, she would likely have just cut a check to my daughter. So my concern is not that but owing taxes on my own money when she passes.