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Tell Me Why TOD Isn't Enough
Old 04-06-2013, 09:32 PM   #1
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Tell Me Why TOD Isn't Enough

A long while back I borrowed some books from the library and researched trusts, wills, and that stuff. One wife, two grown kids (no exes) and in NC (joint assets pass to spouse no probate). We have one spending account held jointly, kids as beneficiaries. The rest of the accounts are separate and are TOD to each other, kids as beneficiaries.

I know we need advanced directives and a bulldog to administer the threats to sue if they don't pull the plug when asked (reading another thread about that). But setting that aside for now, I'd like to concentrate on the financial side only.

If we both go down in a plane crash or something like that, it would be bad (for more than one reason, hehe). That's an exceedingly rare occurance that I'm not sure how much effort needs to be put there. So other than the concurrent death thing, it would seem like there's really not much need for anything else to keep out of probate court?

But as usual, I'm sure I'm missing something. What might that be?
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Old 04-06-2013, 09:39 PM   #2
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If you want to stay out of probate in your stated scenario I think you need a trust.
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Old 04-06-2013, 10:54 PM   #3
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**But as usual, I'm sure I'm missing something. What might that be? **

You are SOOOOO close: Eventually you both WILL pass. At that point, the trust really comes into play. Do the kids a favor and take care of it now.
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Old 04-07-2013, 08:22 AM   #4
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Quote:
Originally Posted by AWeinel View Post
You are SOOOOO close: Eventually you both WILL pass. At that point, the trust really comes into play. Do the kids a favor and take care of it now.
+1.

Sure, the odds are, one of you will outlive the other, and you won't both pass on at the same time. However, think about what things might be like when one of you passes - say it's your DW who's left, and it's 15 years from now. Her mind might not be the strongest or she might not really be 'worried' about things like estate planning. A trust makes sure everything is already set up to automatically handle things, as well as automatically handling the issue of directing assets to whomever is left, without having to retitle things if a beneficiary passes with one of you.

Especially true if an elderly person transfers or opens up a new account - they may forget or not realize that they have to title things as a TOD. Then they have to look at the value of the other accounts to make sure they have the "right amount" in an account to make sure each heir receives the proper share that they wanted them to receive.

Another issue - say you have CDs, each one with a child as beneficiary. Say one matures and you deposit it in the checking account, then both of you pass away. That one child who's name was the beneficiary on that CD that was cashed is now 'screwed', because that CD they were going to receive was deposited into the checking account (and if you had another child's name on the checking account as TOD, then they really hit the jackpot). Even if one of your children was honest enough, they can't legally just cut a check for $100,000 to their sibling to make things right without having to file a gift tax return to use up part of their estate credit.

Also, it's much easier to divide up the estate. Just list %ages in your trust that each child is to receive, and let them figure out if one wants the house, or one wants to receive the IRA, etc. If you list 5 people TOD on a house (which I don't even know if you can do with your real estate assessor's office), it adds more complex paperwork for each one to take their name off (and/or sell) versus just having the executor retitle the house into one heir's name after they divide up the property.

And if there is any 'fighting', it might be easier to have them go at it while assets are titled in a trust waiting to be disbursed, versus having 2 (or more) co-owner beneficiaries directly owning an account or owning real estate....because the trustee can still keep the property going with taxes, upkeep, and insurance (those vacant homeowner insurance policies are expensive!) and take care of things while the dust settles, versus one (or more) siblings co-owning the asset and saying "well, I'm not going to pay my share of the real estate taxes until you agree to pay me $x for the house", and forcing the other co-owners to pay more out of pocket until things are agreed on.
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Old 04-07-2013, 10:08 AM   #5
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However, think about what things might be like when one of you passes...
Thanks for the thoughtful response. I did have that whole retitling thing after one of us dies on my radar;the "open this if I die letter" says that needs to be done. But you're right, it would be one less thing to worry about for her at the time. And based on your comments about the even splitting thing after the last of the couple dies, a trust would be clearly beneficial there. So if you'll end up with a trust when you're down to one of the couple is left, maybe you should go with a trust when both are still around.
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