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How Best to Leave Money to Heirs

You want to do right by your loved ones when you die. It’s just as important to choose the best vehicles to do so.

For starters, know the difference between a bank trust account and a payable-on-death (POD) account.

Here are a few things to consider.

Bank trust accounts

Typically, trusts are accounts managed by someone for another’s benefit. Karen McIntyre, managing director and senior financial advisor at Wescott Financial Advisory Group, explains how they work. Trusts can be irrevocable or revocable. For Revocable Trust (also known as a Living Trust), the person who set up and funded the trust (the grantor) maintains control over and manages the assets (as trustee) until they cannot or choose not to any longer. The grantor can make changes any time until they die. Once the grantor dies, assets are directed to beneficiaries per the terms of the trust, which could mean assets remain in trust. A trust dictates when assets (or income) can be distributed and controls the timing thereof. For Irrevocable Trusts, the grantor gives control to someone else (the trustee) and then no changes can be made to any feature of the trust.

Trusts accounts are where those monies are kept. With a bank trust account, the bank serves as custodian and a trustee keeps legal control of assets in the account. These assets can include cash, savings bonds, stocks, bonds, mutual funds, real estate and other property and/or investments, according to LegalZoom.com.

"Trust accounts can help ensure that your legacy is protected and that your wishes are carried out," says Elle Kaplan, CEO of Lexion Capital.

However, many banks these days don’t allow trust accounts, especially some internet banks. Shop around, some of the larger internet banks like Capital One 360 and Ally Bank do.

many banks these days don’t allow trust accounts, especially some internet banks. Shop around, some of the larger internet banks like Capital One 360 and Ally Bank do.

"Many banks give you a hard time putting accounts into trust. Make sure you choose an online bank or brick and mortar one that makes the process easy. There is nothing worse than trying to do the right thing, but then being turned away," says Bijan Golkar, a certified financial planner with FPC Investment Advisory.

"Ask the bank about what happens if you (and your spouse) pass away. What documentation will they require to get the successor trustee rolling? In a perfect world, the trust makes everything happen. In reality, it can be painstakingly difficult to get banks to budge," he adds.

You can use a trust account to increase your FDIC coverage. For instructions on how to do this, please refer to this DepositAccounts.com article. "But be careful and talk to a financial advisor before going down this road," cautions Golkar.

You can use a trust account to increase your FDIC coverage. For instructions on how to do this, please refer to this DepositAccounts.com article.

The bottom line, "A trust is preferable if you have concerns about how a recipient might spend the funds or want to remove the assets from your estate," says Benjamin Sullivan, a certified financial planner with Palisades Hudson Financial Group.

A trust can establish a system of conditions that have to be met in order for assets to be disbursed to beneficiaries, says Kaplan.

POD accounts

Trusts can be expensive to set up and administer due to the associated legal work and tax compliance. Trusts also can result in higher income tax expense than assets held in a POD account, due to the compressed trust tax brackets, says Sullivan.

A POD account can solve one or two problems, he says. "They are a cost effective way for an owner to have full access to funds during their life and to name who will receive the assets remaining in the account at the owner’s death."

A POD account can transfer assets immediately upon the death event.

"With PODs/TODs (transfer on death) you are telling the bank that if something happens to the account holder, those assets are to go directly to the named beneficiary or beneficiaries. Generally, all you need is a copy of the death certificate and valid identification," says Golkar. "My father had a TOD account and it was a very quick turn-around to get the funds to us brothers. As soon as we had the death certificate it all happened quickly, which helps pay for funeral expenses," says Golkar.

However these accounts are not always simple. Keith Singer of Singer Wealth Management, explains. "For instance, on a brokerage account with TOD, upon the death of the account holder, the account will be frozen until the account transfer is processed. No trades or withdraws are permitted. Many times it takes a few weeks to obtain a certificate and then process the transfer. Trust accounts do not have similar limitations upon the death of the grantor," says Singer.

Know that POD accounts can also be called tentative trusts, informal trusts or revocable bank account trusts, or as an ITF (in trust for) account.

According to attorney Mary Randolph’s blog on Nolo.com, if the account was a joint account to begin with, the bank will need to see the death certificates of all the original owners.

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LA DAVE   |     |   Comment #1
POD/TOD accounts can increase FDIC/NCUA insurance.

Make sure the Institution has and KEEPS an up-to-date and accurate signature card that reflects the name of the beneficiary(s) and how to ID them and communicate with them (name, address, social security number, phone number).  There can be a place on the signature card to indicate "contingent beneficiary(s)" who receive the POD/TOD asset if the beneficiary(s) decease first.

Signature cards for each account (not just the whole institution) is required--especially if there are different beneficiaries for each account.

IRAs are a trust for the benefit of the one owner and then that IRA has a beneficiary(S) and contingent beneficiaries. 

The best way to title accounts for people who you "Trust" is to add them as JOINT.

Brokerage accounts can only have ONE JOINT account holder

--if your spouse is JOINT on your brokerage account, then your children can not also be JOINT but they can be made beneficiaries.

There is no PROBATE process for POD/TOD beneficiaries (or JOINT holders for that matter).

--you don't need a will, or to show a will as a beneficiary on a POD/TOD account to receive the asset--just a death certificate of the JOINT (or all JOINT holders if their are more than one) and your ID.

--POD/TOD has priority over PROBATE, WILLS, and TRUSTS.  That is, even if a WILL or a TRUST indicates a different or conflicting direction for the asset, the SIGNATURE CARD and its naming of beneficiary as POD/TOD HAS PRIORITY and no PROBATE court can interfere with that.


Anonymous   |     |   Comment #2
RE:"There is no PROBATE process for POD/TOD beneficiaries (or JOINT holders for that matter)"

I disagree with your statement regarding no probate for Joint owners.  The account must be titled properly for a joint owners to include "survivorship".  Not just "Jphn Doe or Jane Doe".
LA DAVE   |     |   Comment #3
#2 is correct

Your "Joint Account" should say "Joint with right of survivorship"

never simply "AND" and probably never simply "OR"  to avoid Probate.

Thank you #2 above.

Estate planning titling and documents and processes take a much longer forum to address.  The best reference is no this forum, due to its intent, but rather a qualified estate attorney/planner.

Anonymous   |     |   Comment #5
Many banks will not formally title the account with the JTWROS designation, they will only list the various  joint account members, and categorize the entire account as Joint.  JTWROS is the default joint ownership in which new accounts are opened (vs JTIC or Community).  When opening a joint account, it's good to confirm the type of joint account.
paoli2   |     |   Comment #6
#5  You are right.  I have argued with many of our banks and credit unions as to why "with right of Survivorship" is not on any of our paperwork.  They insist it is listed that way in their records but I prefered it when it was written on our paperwork.  Hope it holds up when necessary.
Anonymous   |     |   Comment #7
Send a written confirmation whereby "they" stated what was there yet they recognize that your title is....   With a person's name.  And copy for your files.
Anonymous   |     |   Comment #8
Nonsense. The article is correct. POD accounts are an easy, reliable  and no hassle method method of transferring assets upon death to beneficiaries.
Anonymous   |     |   Comment #9
There is one step before "going to the beneficiaries ," i.e. going to the other joint owner(s) and thereafter going to the beneies.
Anonymous   |     |   Comment #14
The banks disclosure papers state what is done in each situation. You (by law) should have been given on when the account was opened. 
Anonymous   |     |   Comment #15
Accounts no longer state with rights of survivorship or tenants in common. The disclosure dictates how an account will be handled when a death occurs. Read your disclosure given when the account was opened. 
As executor of 3 estates and a beneficiary of two estates that is the way it has worked at several banks and credit unions throughout the USA that I have been involved with. 
Anonymous   |     |   Comment #20
Funny, every bank or CU that I have ever had dealings with ALWAYS  gave me the option of how I wanted my accounts with multiple owners titled.  It is the account holders responsibility to see that the accounts are titled as they want them when the accounts are first opened.
Anonymous   |     |   Comment #13
If you put someone on your account your funds could be lost in a divorce, an accident or in any lawsuit etc. That  person is a joint owner and those funds are subject to any situation that the owner could be in. 
lof   |     |   Comment #10
question, could the Living trust be named as the POD.  Recently I've had number of banks & CU, prefer not to have the account placed in the name of the living trust, but ok named  as the POD.
Anonymous   |     |   Comment #11
Why leave any money, after all, I worked very hard, saved money even from my food and lived modestly all my life. Now I like to spend it all and enjoy the retirment, leaving money is a stupid tradition, enjoy it yourself, nobody will give a medal if you leave it all. Your heirs will spend it all at no time and mention your name few times after your demise and after the money are gone, you will fade from their minds too. Your money will have no meaning to anyone else but yourself.
Anonymous   |     |   Comment #21
I almost totally agree with you.  The only problem is making sure your money does not run out before your time runs out and still not leaving much money on the table.  Just to be sure, I will be leaving any remainder of my estate to my favorite charity. 
DB   |     |   Comment #25
Yeah, except that plan is wishful thinking mostly. I doubt that anyone who has " saved money even from my food and lived modestly all my life".............can just flip a switch & just spend at a uncharacteristic pace after retirement. It's not in your DNA. Once a miser always a miser.

Besides, unless you know exactly what your expiration date is going to be, your plan, such as it is, likely means you'll run out of money or still have money left after you die. 

BTW, your relatives will eventually forget you regardless of whether you leave them money or not. That's life. You want to be remembered? Dedicate a wing at a hospital or build a monument to yourself............if it's so important that others acknowledge your greatness. 
Anonymous   |     |   Comment #28
#25, there is nothing wrong if you run out of money in your later years, you will not need it anymore, your memory of this life will be full of joy and happy moments. You can tell stories to your grand children of your adventures.
If you get to a poverty level in your last years is even beneficial, you will qualify for all kinds of government programs and handouts.
Anonymous   |     |   Comment #31
True, but who would want to live their last years in poverty if they had the finances and choice earlier in life not to have it end that way.
Anonymous   |     |   Comment #33
#31, I don't think most people can sustain rich life style without counting on medical expenses, unless of course you are multi millionaire and have steady income for life.
You can not count on your saving for life time income unless you withdraw a $1 a day.
Anonymous   |     |   Comment #44
#31, I know you are wrong on both counts.  I started saving when still in grade school doing chores after school.  Been frugal all my life,  living below our means even while raising a family and now am happily retired while carrying an adequate amount of life, health, and long term care health insurance.  And am not a multi-millionaire by no means, however my savings will see us through for the rest of our lives quite comfortably. 

It can be done.  Just don't try to "keep up  with  the Joneses", feel you need the latest  and greatest of everything, or fall for the newest fads.
Anonymous   |     |   Comment #45
I work with the aged poor. You are dead wrong. You may "get by" on public assistance but it's fraught with limitations, delays and humbling realities you want to avoid if at all possible.
Anonymous   |     |   Comment #12
#1, your explaination is too complicated ,POD/TOD, wills, probate, SS numbers, record keeping, courts, signature cards, beneficiary and the rest of that mambo jumbo.

You do not need any of that or to explain any of that to anyone if you just open JOINT account and put yourself as a secondary user, that is it. You have all of the rights to that account now and forever and you can write checks, transfer money or pay bills and nobody will ever ask you anything.
Both persons SS #'s are on file with the bank by law and you do not have to correspond or ask for any permissions ever. Same applies to savings, MM and CDs.
paoli2   |     |   Comment #16
I think this is the way it "used" to be but nowadays we have banks which print out only one name on the interest checks on joint accounts so the secondary joint especially if it is with a credit union does not get full access to the checks.  The only way my spouse can cash our joint checks would be if he shows his POA to our bank.  The credit unions told me they only print the primary member's name on checks even if someone else is joint and becomes a member also.  Penfed especially sticks to this rule.  So in my opinion, the "joint" does not have full access to the Penfed or other cu or  banks accounts who do this.
Anonymous   |     |   Comment #23
Speaking of Pen Fed...I recently "joined" and completed their forms to have a joint owner with my wife...thus, with a POA, he can cash checks but it seems for $5 to make him a member and a joint tenant...then the checks "should" be to both with an "or."

Verifying who are the beneficiaries has been a mini-nightmare...e.g the names were posted on the website (with typos which were corrected by them) but "now" PenFed will not post their beneficiary names.  In order to confirm that they entered the correct SS numbers for them, etc. I asked for them to US mail a confirmation of owners SS AND the beneficiaries SS...none received yet!  Is this Standard Operating Procedure in starting a "nice" cu relationship with PenFed?  Thanks
Anonymous   |     |   Comment #26
Anyone whose name is on as joint can clean the account out and leave it at a zero balance. Anyone can close the account out you do not need a POA. To cash a check made out to another person you have to have a POA or deposit it to an account with that persons name on it. 
Anonymous   |     |   Comment #30
#16, just have the interest direct deposited into a joint account.  PenFed is very accommodating.  They will even do a ACH deposit to an outside checking account either by a monthly automatic transfer or only when requested. 
Anonymous   |     |   Comment #35
Did you verify that PenFed records correctly reflect the joint account owner, whether or not with "right of surv", and the beneficiaries are spelled correctly, with correct soc sec numbers, etc. for all?  I have tried and they have promised to send my a hardcopy by mail...nothing rec'd.  They had earlier mistyped some last names, etc.
Anonymous   |     |   Comment #37
I have been a PenFed member for a great many years, thanks to Ken.  I have always verified that all my accounts and CDs are recorded correctly.  And I have found mistakes and incorrect designations on some and they had always been corrected with a few phone calls or e-mails.  I think PenFed is so big, many of their SRs are not being trained properly and new employees often get things wrong.  But they  can be corrected.
Anonymous   |     |   Comment #29
#16, Paoli2, you are misinformed or you are trying to misinform the readers, joint account is called joint because either party has equal access to the money at any time, unless you have specifically instructed the bank with 2 signatures required on the checks or withdrawals.
paoli2   |     |   Comment #34
#29  I never try to misinform anyone.  I just relate MY experiences with these banks and credit unions.  I have tried to insist they allow either one of us to sign on joint accounts but our bank says NO WAY!  Guess which bank loves to make things harder?  They also have known both of us for years and still insist on their rules.  As for the others, I would love to see even YOU try to get them to do it the way YOU want.  WE must do things their way or go elsewheres so don't call me misinformed just because you can do it "your" way at your bank. 
Anonymous   |     |   Comment #17
To all the above.

It's YOUR money and if you want to use a legal title for the account insist that it be set up according to YOUR requirements.  The banks disclosure statements give you that right.

If they refuse walk out!
paoli2   |     |   Comment #18
#17  You are not facing reality.  This is not the olden days where the banks really wanted our deposits or cared if we left.  "They" make their own rules and if we don't like it, we can go someplace else but where??  We are usually there in the first place because they may be having a Promotion and we can get a bit higher rate.  Not like even 2.5% for a 5 year CD is running at all the banks or even credit unions.  It's not an era where "savers" can make rules or even find "better" banks or cus.  Should I have told Penfed to forget about doing all those 3% CDs for me unless they do things like I want?  I would be still waiting for another institution to have a 3% special!  Like I wrote.  Face reality.
Anonymous   |     |   Comment #32
#18:  I believe poster #17 was facing reality.  The laws of the land still prevail, regardless of whatever some $8.00/hr bank employee tells you.
In your dealings with Penfed you needed to speak to a VP if the account title wasn't to your liking.
Most things may go ok, but when there is a "questionable" situation a lawyer usually gets involved.  Then the laws are used, not what a customer rep said.  That's reality!

Take care.
Anonymous   |     |   Comment #22
#17 if right on.  "If they refuse walk out!" 

Of course for some,  "money talks".
paoli2   |     |   Comment #36
#22  If money didn't "talk" what are we doing spending time here trying to find the highest rates?   We may not always like what it says but if we make problems, we may cheat ourselves out of doing business with the best ones. (The "few" there is these days.)
Anonymous   |     |   Comment #19
The first sentence in the article really irks me. Doing right by our loved ones require that we leave an inheritance to them? Hogwash. Whether or not my loved ones leave me anything upon their death would never alter my feelings for them. 
paoli2   |     |   Comment #24
With many people nowadays, it all depends if they can afford to leave anything to their loved ones.  My mom didn't have an extra cent to leave me but that sure doesn't mean I love her any less.  What is more important is that we try to be here for them when they need us "now".
Anonymous   |     |   Comment #38
Consider yourself fortunate if you do get something from parents. Only half of American retirees are planning to give an inheritance to their children, according to a recent HSBC survey. (Those that did leave a bequest gave an average $177,000.) And a US Trust survey found that two out of three of affluent parents viewed spending on travel or personal experiences as more important than leaving a financial inheritance to their family.
Anonymous   |     |   Comment #39
I don't put too much faith in any public surveys.  Many people value their privacy and do not respond and many who do, say the opposite of what they actually think or intend to do just to confound this issue.  I know I do.  I do not like the personal intrusion.
Anonymous   |     |   Comment #40
Just because your dishonest, why do you believe others are?
Anonymous   |     |   Comment #41
Time is money...if the survey "taker" does not pay for my time, they get exactly what they paid for.  I have no obligation to be truthful w/o some fiduciary duty (hint, hint..banks/CUs!).  When was the last time a police officer was obligated to tell the truth when asking questions, etc. in the course of investigating a crime?
paoli2   |     |   Comment #42
Wouldn't it be more honest to just tell the survey taker you don't want to participate or don't have time to take a survey?  These surveys can be very helpful to others but not if they are just lies.  "Investigating a crime" and taking a survey are not in the same category.  I don't approve of it when police lie to catch someone who commits a crime but they at least are doing it to protect the rest of us.  Your lies aren't protecting anyone.  I do hope the majority of survey answers don't come from people like yourself.
Anonymous   |     |   Comment #43
Means justify the ends...not normally
Anonymous   |     |   Comment #49
Identify one survey that made you change your mind about anything. Besides, there are plenty of facts staring us in the face on a daily basis. I read the HSBC article only to conclude it was to promote the insurance business. When I read, " Yet 45% of retirees think one good piece of advice is to not spend money that you don’t have."  I can only imagine what the other 55% are thinking! Maybe a survey can find an answer.
Anonymous   |     |   Comment #46
Don't take the survey.  Then no loss of your precious time.
Anonymous   |     |   Comment #47
And, please do rely upon all that do respond to surveys!  They are "very" reliable.
Anonymous   |     |   Comment #48
There is when you answer the phone just to find out the caller wants you to answer survey questions, opening mail only to find out it's a survey (junk mail), or stop you on the street, etc. Worst of which are government surveys threatening you with fines if you do not complete their intrusive survey.  #46, just try not taking that survey if you ever receive one in the mail.   After the second threatening notice I sent it out with a lot of bull.
paoli2   |     |   Comment #50
I will usually cooperate with "short" daytime surveys but the most angry I ever got at one was last week when this male called after 9 PM at night when I was settled down to watch one of the few programs I enjoy and wanted to know if I could help by taking a 30 minute survey for him.  I was furious and told him that NO person I know wants to be disturbed after 9 pm to take a 30 minute survey and I was not going to be disturbed at that time of night for any survey!  What nerve!  Thirty minutes is a long time to answer questions and I could not believe they would dare call so late.  He didn't call back.

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