Some people believe that the easiest route is the best route, and they carry this mentality into their estate planning efforts. They may believe that payable on death accounts are the solution to their estate planning, but it is important to realize just how limiting these accounts can be.
Banks, credit unions, and some brokerage firms offer payable on death or transfer on death options when you are opening your account. As the name implies, the assets that are in the account are transferred to a beneficiary of your choosing after you pass away.
One of the benefits of utilizing a payable on death account is the fact that this transfer of assets takes place directly outside of the costly and time-consuming process of probate.
Yet, there are some things to consider before assuming that all you need to do is create a payable on death account. First, you may be able to add multiple beneficiaries. But, in many cases you are required to have the beneficiaries split the resources equally. This lack of control is a problem for many people.
Secondly, you gain no tax advantages or asset protection when you create a payable on death account. These resources are considered to be a taxable part of your estate.
Finally, there is no way to add incapacity contingencies when you are creating a payable on death account.
Payable on death accounts sound great on the surface, but may be too limiting for many individuals. To create an estate plan that is tailor-made for you without any constraints, the intelligent first step is to discuss all components of your plan with a licensed and experienced Campbell CA estate planning attorney.
- IRS Confirms Grantor Trust Status Alone Does Not Cause a Step-Up in Basis - September 14, 2023
- Estate Planning Insight: How to Tackle Challenges After a Loss - September 12, 2023
- Team Litherland, Kennedy & Associates Volunteer Day at Martha’s Kitchen (VIDEO) - September 1, 2023
