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SFGI Does Not Allow Benficiaries Onto Accounts

Thursday, February 20, 2014 - 9:20 PMSFGI Direct - Details
I need to open an account for my 87 year old mother and was looking at the 1% savings account at SFGI. I am trying to open accounts that earn her the best interest. Our father /her husband passed away last year so the problem is SFGI only allows individual or joint accounts with no beneficiary.
I live in a different state and have three other siblings but I have been the one helping her with her monetary situation and have access to her accounts online. I would not be contributing anything to this account. It will all be her money.
Question is how does the IRS view this and who would receive the 1099 at the end of the year?
If this gets too complicated I was thinking to just open this as an individual account for my mother and if something were to happen to her I immediatly transfer the funds from SFGI account to her checking account which has all four siblings listed as POD. Would this raise any red flags if a large amount of money was transfered upon ones death bed?
Any thoughts?
2
FARFAR91 posts since
Feb 26, 2013
Rep Points: 328
1. Friday, February 21, 2014 - 1:57 AM
I would set up a joint account with your mother as the primary member and you as the joint owner on the account. In this scenario the 1099 would go to her and the interest income would be credited to her for tax purposes. If anything happens to your mother, the money would go to you and then you can distribute it to your three siblings.
5
loulou521 posts since
Aug 3, 2010
Rep Points: 3,239
2. Saturday, February 22, 2014 - 4:48 AM
Lou's scenario will work -- except. Except that its based on trust, not requirement, that you split the money with the other siblings. AND, except that in that case, you would be liable for gift taxes when you gave the siblings any amount over $14,000 in a year, or you would have to declare and subtract that amount from your lifetime maximum that you can give, which you might not want to considering your own ability to leave an inheritance, you would be using that up.

Another way you can do it but avoid those issues is set your mother's money up in a living trust, and then simply open the account for the living trust and whatever amount of money from the trust you want to put in that account. You then do not list beneficiaries with the bank, instead the living trust controls that, with the beneficiaries listed in the trust documents. A living trust is a typical way for people to set up their assets in order to avoid probate after death, just like listing beneficiaries on a POD account. And, as I've read (here, I think), I believe the beneficiaries listed in the living trust also provide for the extra FDIC or NCUA insurance similar to how beneficiaries listed for a POD account do. 

You could put all her assets in the living trust, if wanted, or some of them, and either way simply open a  bank account with whatever amount of cash from the living trust you want to put in that account, opening it as an account for the living trust.

People typically set themselves up as the executor of the living trust, and just sign as they would otherwise, except that they sign as executor. 
2
me1004me1004345 posts since
Jan 16, 2010
Rep Points: 2,360
3. Saturday, February 22, 2014 - 5:13 AM
Good catch, me1004. I forgot about the gift taxes. I wonder if SFGI would allow living trusts, considering they do not allow POD accounts.

FAR's solution may work, if he controls the account and he can transfer all the money online with requesting permission from the bank.
2
loulou521 posts since
Aug 3, 2010
Rep Points: 3,239
4. Saturday, February 22, 2014 - 7:54 AM
A bank would not let you open an account for someone else without a POA. If they would not allow beneficiaries I certainly would find another institution. 

There actually is no gift tax but just a form you deduct the amount of the gift because the limit for estate tax is over 5 million. I believe it is form 709. 
2
AllyAlly783 posts since
Jan 16, 2010
Rep Points: 2,278
5. Saturday, February 22, 2014 - 8:41 PM
Thanks for all the advice. SFGI actually made my decision easy. After I filled out the application online there was a note that said I needed to call them for verification. I called the number provided all day and only got a busy signal. I then tried to send an e-mail and it would not go through. Since there was no way to contact them I ended up going with someone else.
2
FARFAR91 posts since
Feb 26, 2013
Rep Points: 328
6. Saturday, February 22, 2014 - 9:48 PM
Ally, the gift tax actually would be optional, as I said in different words. You can either pay it now, or you can deduct from your life amount allowed, declaring that in the form you fill out that you mentioned. In this case, FAR might prefer that the gift tax be paid now -- as he could have all siblings chip in for it, and in doing so he would save his life limit for his beneficiaries benefit -- otherwise, it would come 100% out of his life limit, nothing out of the siblings. He might want to save all of his life limit -- up to him. If he ends up leaving more than his limit, he would have a heavier tax at that time than a third of the gift tax now.

Also, that life limit can and does change. I haven't been keeping track of it (I don't have to worry :), but seems to me it was supposed to gradually go back down to $2 million -- maybe not, maybe it now has been set decidedly (for now) at $5 million. But who knows what it will be when any of us die. 

Still, as I said, the other three siblings are going to have to have a LOT of trust in FAR -- because legally he would not have to give them a penny. I would not trust my siblings with 10ยข. 

As for FAR's other idea, to make a point of closing an account in her name if "something were to happen to her": Wow! That's even worse than depending on trust, is simply depending on luck. People can and do die on the spot without a moment's notice. Even by illness, but also by any number of other things, like a car crash on the way to a routine doctor's visit, or maybe a home burglary gone bad, or maybe just some very serious food poisoining. You cannot count on being able to move the money before it is too late. 

Another consideration, you mentioned it being a "large amount of money." You better check into any bank's policies about that -- many banks reserve the right to require a certain amount of advance notice for such a withdrawal, and you won't know whether they will exercise that right until the time. (In fact, today I was reading about just such a policy for 60 days notice by Xceed FCU.) This also could undermine your plan to withdraw the money quickly if she goes downhill.

Using a living trust could avoid all these issues. However, most people use an attorney to draft one, and I have read a typical price for a living trust is about $1,500 to the attorney. I have known people who have done some research and drafted their own, but if you don't really know what you're doing, you run real risk doing that. Still, the cost of an attorney to handle probate if the money ended up going that route would probably be as much as the living will, or maybe more -- so it might actually be a break even expense.
2
me1004me1004345 posts since
Jan 16, 2010
Rep Points: 2,360
7. Saturday, February 22, 2014 - 10:03 PM
There are no gift taxes due, until it is over the limit. Just a form that has to be filled out. 
2
AllyAlly783 posts since
Jan 16, 2010
Rep Points: 2,278
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