Originally Posted by AWeinel
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.
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
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.