People sometimes fall victim to the “little bit of knowledge is a dangerous thing” phenomenon, and this applies to the field of estate planning. In this post, we will look at a couple of risky approaches that you should be wary of when you are planning your estate.
Probate is the legal process of estate administration, and your estate would pass through it if you utilize a will to express your final wishes. This process will take eight months to run its course at minimum, and no inheritances are distributed while the estate is being probated by the court.
Another negative is the cost factor. There is a filing fee, and there can be legal and accounting fees, appraisal charges, liquidation expenses, the executor’s remuneration, and various incidentals. These expenditures reduce the value of the estate before it is transferred to the heirs.
There is also a loss of privacy, because probate records are available to the general public. If anyone wants to contest the validity of the will, they can come forward during probate.
When people learn about these drawbacks, they look for ways to get assets into the hands of their loved ones outside of the probate process.
Payable on Death Accounts
If you open an account at a bank or a brokerage, you can make it a payable on death or transfer on death account. You would name a beneficiary, and they would have no access to the funds while you are still living, so there would be no worries on that level.
After your passing, the beneficiary would obtain a copy of the death certificate. It would be presented to the institution, and if everything is in order, the assets would be released to the beneficiary. This transfer would not be subject to probate.
You may decide to use a payable on death account as a broad but simple estate planning tool. All you have to do is tell the beneficiary to distribute the assets among multiple different people after your passing.
This is a very risky approach, and it has negatively impacted countless families over the years. You may feel as though they are trustworthy, but the beneficiary would have no legal responsibility to follow the verbal instructions.
Someone that is greedy and dishonest may ignore the wishes of the decedent and pocket all of the money. Short of this, a beneficiary may decide that the way the decedent wanted the money to be distributed is not fair and take the matter into their own hands.
There is no reason to take chances with payable on death accounts when there are far more effective options if you want to avoid probate.
The other risky approach that some people take involves the utilization of joint tenancy. This is the condition of co-ownership of property, and it comes with right of survivorship.
For example, let’s say that you own a home, and you change the paperwork to make your daughter a co-tenant. She would have a 50 percent ownership interest immediately, and if you die first, she would assume ownership of the entirety of the property. This would be a probate-free transfer.
This can sound great on the surface, but there is danger lurking beneath it. If your daughter was targeted by the IRS, a creditor, or some other litigant, her portion of the property would not be protected. You would also need her cooperation if you want to sell the entire property.
Schedule a Consultation Today!
There is nothing wrong with taking steps to facilitate smooth and efficient asset transfers to your loved ones. This being stated, there are risky methods like these two approaches, and there are safer alternatives.
We can gain an understanding of your situation and your estate planning goals and explain your options so you can make informed decisions. When you decide to go forward, we can create a custom crafted plan that ideally suits your needs.
You can set the wheels in motion right now if you call us at 513-721-1513, and you can fill out our contact form if you would prefer to send us a message.