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Passing on Assets Outside of Probate: PODs and TODs
For a variety of reasons, people sometimes want some or all of their assets to pass directly to specific individuals upon their deaths, outside of probate. One way to accomplish this is to set up a “payable on death” (POD) account for money in a bank account or a “transfer on death” (TOD) account if funds are in a brokerage account.
Probate is the process through which a court determines how to distribute property after an individual dies. Some assets are distributed to heirs by the court (probate assets) and some assets bypass the court process and go directly to beneficiaries (non-probate assets). With POD and TOD accounts, the account owner names a beneficiary (or beneficiaries) to whom the account assets are to pass when the owner dies. Generally all that is required to get the money or control of the account is for a beneficiary to show the bank manager or the brokerage firm an original death certificate. The funds pass outside of probate, meaning that the beneficiaries can receive the money quickly without the involvement of the probate court. The account assets also receive a “step-up” in basis when the original owner passes away, meaning that no capital gains tax should be due if investments are liquidated in order to be transferred.
Only the account owner has access to the assets while alive; the named beneficiaries have no control over the account, and the owner can change beneficiaries at any time, if competent to do so. If the named beneficiary predeceases the account owner, then the assets are distributed to the remaining beneficiaries or to successor beneficiaries, depending on what the owner writes on the beneficiary designation form or online. If there is only one beneficiary and he or she predeceases the owner, and the owner makes no subsequent changes to the beneficiary designation, the assets go into the account owner’s probate estate.
But receiving assets could be a problem for certain beneficiaries, such as a child with special needs who depends on Medicaid and other public benefits. If the account amount is large enough, it could be advisable to do special needs planning to avoid the assets interfering with the receipt of public benefits.
Also, some attorneys discourage passing assets through accounts like these for the simple reason that people sometimes forget about the accounts, and their existence can confuse an individual’s estate plan. For example, the Will may say that everything should be distributed equally to the account owner’s three children, but the POD or TOD account passes assets to only one child, creating unequal shares among the children. If avoiding probate is the goal, it may be better to put all assets into one revocable trust that clearly states who should get what. But these potential problems are much less of an issue if the estate is a simple one – for example, one surviving parent with only one child.
Source: Elder Law Answers
Why Elder Law Attorneys Aren't Just for Seniors
An Elder Law attorney is an attorney who specializes in providing legal services for the elderly and disabled. They assist with getting advance directives in place so that you are taken care of - and by whom - are chosen by you, and not just left to chance, or a court hearing.
Assuming that family members will just "take care of things" can lead to many unnecessary problems, primarily stemming from the burden on your loved ones when they're forced to make decisions for you, without knowing what you would have wanted.
Elder Law attorneys can also focus on preparing for the financial planning in the event one becomes chronically ill or disabled. This is a hugely important issue to bring up in a discussion with an Elder Law attorney who can help you understand how "just doing nothing" until funds run out is often a terrible option.
Hiring an Elder Law attorney is practically a necessity for anyone facing the aging process, particularly when a debilitating disease or condition is likely to be involved. The special legal issues handled by an Elder Law attorney are:
An Elder Law attorney can help you to retain as much control of your own life as possible by helping you make decisions for yourself in "Advance." He or she will draft documents so YOU get to decide:
An Elder Law attorney will also determine whether you need legal documents to assist you with funding long-term care, such as
Unlike many legal fees, an Elder Law attorney can be cost effective, since the costs incurred are usually limited to one or two visits, along with document fees. Often an Elder Law attorney will not charge for the consult and will bill a flat package-rate depending on what documents are needed for each individual case.
Source: BUCKLEY ANNE KUHN FRICKER, JD, GCM, AGINGCARE.COM
Title: Estate Planning for a Single Person
If you are single, you may not think you need to plan your estate, but single people are in as much need of a plan as anyone else. Estate planning not only involves determining where your assets will go when you die, it also helps you plan for what will happen should you become incapacitated, perhaps as the result of a stroke, dementia, or injury. If you don't make a plan, you will have no say in what happens to you or your assets.
Without a properly executed Will in place when you die, your estate will be distributed according to state law. If you are single, most states provide that your estate will go to your children, parents, or other living relatives. If you have absolutely no living relatives, then your estate will go to the state. This may not be what you want to have happen to your assets. You may have charities, close friends, or particular relatives that you want to provide for after your death.
If you become incapacitated without any planning, a court will have to determine who will have the authority to handle your finances and make health care decisions for you. The court may not choose the person you would have chosen. In addition, going to court to set up a guardianship is time-consuming and expensive. With proper planning, you can execute a power of attorney and a health care proxy, which gives the people you choose the authority to act on your behalf, as well as an advance directive giving instructions on what type of care you would like. The power of attorney can also dictate exactly what powers the individual has.
Single individuals who are divorced need to make especially certain that the beneficiary designations on their IRAs, life insurance policies, and relevant bank accounts are up to date. If you don't, your ex-spouse could get the funds. And for single people of means, opportunities to avoid state or federal estate taxes can be more limited than for married couples, although advance planning can close the gap.
In short, proper planning is a good idea for everyone. Contact your attorney to help you create an estate plan.
Source: Elder Law Answers
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