Probate. A word that many try to steer clear of when planning their estate. And while probate is not as scary or expensive as many people think, avoiding it where possible is a worthy goal.
The purpose of probate is to value a decedent's estate, determine beneficiaries, appoint a Personal Representative/Executor and transfer the estate to the determined beneficiaries. By definition, probate is almost always a court-supervised process and that means it can be costly and time- consuming.
However, there are many timesaving strategies that can simplify the process or skip probate altogether.
In our column a couple weeks ago, we wrote about Beneficiary Deeds and discussed how these deeds can bypass probate when transferring real estate from the property owner to the beneficiary.
Of course, real property can make up only a portion of someone's estate; typically, bank accounts or investment and retirement accounts represent larger percentages of a person's assets. In those cases, there is also a way to transfer those assets outside of probate using what are commonly called Payable on Death (POD) or Transfer on Death (TOD) designations.
With POD and TOD designations on these kinds of accounts, the account owner names one or more beneficiaries to whom the account proceeds will transfer when the owner dies.
Generally, all that is required to receive the money or have control of the account is for the beneficiary to show the institution an original death certificate. These funds then pass to the beneficiary without involvement by probate court.
While the account owner is still alive, the named beneficiary has no control over the account and the owner has the right to change the beneficiary designation at any time.
A client of ours recently asked the question, "Does the Payable on Death designation supersede the same designation listed in my Last Will & Testament?" The answer is yes because the account proceeds never go into the estate; they bypass the estate and go directly to the beneficiary.
But that result can pose problems, too, especially if that payment then makes the distributions from the estate unequal when that was never the person's intent.
We always remind our clients to check their beneficiary designations so that the work we do for them does not get overridden by a document that was filled out years before. All too often, someone will open an account and then forget who she designated as the POD or TOD beneficiary; and if she forgets to change the designation to be consistent with the estate plan she just prepared and paid for, she may have just wasted that effort and, worse, yet, caused a problem for her heirs because of an uneven distribution plan.
To avoid that problem, we advise clients to name the account beneficiary as "The Estate of YOUR NAME HERE," so the designation is parallel with the intentions listed in your will.
That part of the form can also be left blank so that no POD or TOD designation is made and, therefore, the will's distribution plan is not disturbed.
As with all the other topics in these columns, we discuss details of this probate shortcut and other shortcuts in our no-cost seminars. The next seminar will be at 10 a.m. Saturday, Jan. 18; seating is limited (no more than eight people), so that we can focus on the specific questions of a small group.
If you are interested in the seminar, or if you have any questions about this article or topics you would like us to address in future columns, send an e-mail to firstname.lastname@example.org or call 970-270-1213, ext. 4.
Brad Wright's business and estate planning practice includes transactional and litigation matters with a special focus on business succession. His brother, Steve Wright, has a similar law practice in Idaho Falls, Idaho and, together, they assist businesses of all sizes and types with a wide variety of legal issues.
© 2019 Brad R Wright, Steven J Wright