By Revis, Hervas & Goldberg P.A.
Individuals often ask us how they can transfer their assets to their families, quickly and easily, without the costs and hassles of going through the probate system. (We have previously discussed the benefits of “Lady Bird Deeds” in a prior post – http://kgrhlaw.com/ladybirddeed/) One answer we frequently give to this question is, make sure to title your bank accounts properly.
Most people know that life insurance has a designated beneficiary. When someone dies, the beneficiary contacts the insurance company, provides the company with a copy of the death certificate, and the company pays out the proceeds to the beneficiary. What most people do not know is that banks and other financial institutions allow for designated beneficiaries. An individual can go to his or her bank, and title his or her account so that upon his or her death, the account ownership will automatically transfer to another person, thereby avoiding the probate process. Banks typically use one of three designations for a beneficiary – TOD, transfer on death; POD, payable on death; or ITF, in trust for.
As an example: Husband and Wife have a joint savings account at Bank. Son is listed as the POD beneficiary on the account. While Husband and Wife are alive, either of them can fully access all of the funds in their account at Bank. If Husband passes away, Wife maintains full control of the funds, and vice versa if Wife passes away. After both Husband and Wife pass away, Son merely needs to go to Bank with a copy of both of his parents’ death certificates. Bank will then transfer the account to Son, and Son will have full access to the funds without having to go through the probate court process.
Between court costs, recording fees, certified copies, and attorney fees, probate can sometimes be quite expensive. Additionally, it can sometimes drag on for months, if not years. We often have individuals come to us because their mother or father has a bank account which contains relatively little money, and which does not have a designated beneficiary. The only way for the individual to obtain the account proceeds is through probate, which may be more costly than the value of the account. If there are no other assets requiring probate, the son or daughter may decide to forgo receiving the money in such a situation. Had the individual’s mother or father planned accordingly, the beneficiary would easily to be able to access the funds.
Adjusting the title to an account as described above (TOD, POD or ITF) can be a very helpful tool. However, this type of planning does not work well for every beneficiary. If the designated beneficiary is a minor, then a guardian may have to be appointed, which is cumbersome and expensive. Perhaps the better option would be to prepare a trust.
There are a lot of tools available to help individuals plan for their future, and, as with most things in life, there are positives and negatives. It is a good idea to meet with an estate planning attorney to help determine what is the best course of action based on an individual’s current needs and circumstances.