Protecting Cash In This Current Economic Climate

GMOTM | May 22, 2020 | 5 posts since 2020

We are managing our elderly father's estate, and have made a very rookie mistake.

We currently have several hundred thousand dollars in one bank! (Chase Bank) We can move about 250K without penalty, however an additional 600K is in two CD's. So--we are considerably over the FDIC insured limit.

I understand bank failures are unlikely, but we are not comfortable with this risk. Should we take the penalty and cash in one or both CD's? We could add my name to one of the CD's and be insured for 500K total, and only cash out the CD paying the least interest. Is this a good strategy?

Note: At this point, I am unsure what the penalty would be, as they have recently changed the terms for early withdrawal. We have not received any notice of this change of terms, I found this info online. Are they required to abide by the terms in effect at the time of CD purchase?

Any advice is appreciated!

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Answers

alan1 | May 22, 2020 | 877 posts since 2015

The situation, as you describe it, is unclear to me. You write: "We are managing our elderly father's estate..."

That might indicate that "we" might be the executors or administrators of the estate of your late father. In that case, it would seems that the estate is the owner of the CDs. I don't see how "we" could add your name to a CD owned by the estate. But you describe your father as "elderly", which suggests he is alive, and that there is no estate at this time.

If your father is alive, the CDs are his. In that case, are "we" the guardians or conservators of your father's assets? If not, you can't go about taking control of his assets. They're his assets. (If he wishes, he can add co-owners or beneficiaries to increase insurance protection, or for any other reason; "we" cannot.) And if "we" are in fact guardians or conservators, I think it is a poor practice for guardians and conservators to use their powers to acquire ownership of someone else's assets.

Or maybe "we" are the holders of a power of attorney. There are so many possible scenarios.

Please clarify the situation.

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GMOTM | May 22, 2020 | 5 posts since 2020

To clarify: Yes, our father is still alive--he's 90 yo, has dementia and is in very poor health.

By "we", I mean my sister and I manage his assets. I have full durable power of attorney, as I live in the same town as our father, my sister lives in a distant state. Even though I have sole power of attorney, I do not make any financial or health care decision without a discussion and agreement with my sister.

I believe my sister and I are both beneficiaries upon death for both CDs, just as we are on other bank accounts. I will clarify that with the bank today. I would not add my sister as a co-owner, as she is in the middle of a divorce, and I don't want her soon-to-be ex to have ANY claim to our father's assets.

And I fully agree with Alan1--I would never use my power of attorney to acquire his assets. Our only goal is to fully protect them in case of bank failure. Again, I realize this is unlikely to happen, but we are not willing to take that risk.

Thanks for the input so far, I hope this clarifies the issue!
Edited to add: I believe this 500K limit, if we add both of us as beneficiary, is per BANKING INSTITUTION and not per account holder(s). Is that correct?

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alan1 | May 22, 2020 | 877 posts since 2015

As to deposit insurance, I suggest you input data on all accounts at Chase connected to your father, your sister and yourself, into the FDIC's Electronic Deposit Insurance Estimator (EDIE) at https://edie.fdic.gov/

And, yes, check with the bank as to who's listed as beneficiaries on your father's accounts.

Edited to add: Here are things to consider. I am not expressing any opinion on this matter (including that maybe it's not something to consider). It's clear that any changes you are considering re adding co-owners or beneficiaries are for the purpose of protecting your father's assets.

But, for example (and I am not expressing an opinion), might there be an issue related to the holder of a power of attorney designating himself (or even someone else) as a co-owner? Or as a beneficiary? Perhaps these are non-issues. Perhaps not.

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GMOTM | May 22, 2020 | 5 posts since 2020

Good points Alan1. I hadn't thought of "how it would look", as I know what our motives/reasons are. I think we are both beneficiaries on all accounts anyway, so this might be a non-issue! I don't think we'd designate ourselves as co owners, but rather as POD's, and only if that is necessary That seems to be the best option, from what I'm reading (and trying to understand) on the FDIC website. I will have a better understanding after my meeting with the banker today. If there is still confusion, we are certainly willing to talk to the estate attorney that did my Dad's POA, living will, etc.
Thanks again!

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Choice | May 22, 2020 | 937 posts since 2020

I don’t necessarily disagree with the comments above...but to complement them...I suggest you/sister need to talk to the attorney (hopefully an elder bar attorney) who drafted the poa since s/he may have to enforce it down the road, eg lesson for all test these poa’s before you need them especially medical poa.
And be careful in dealing with FIs, they may frustrate and claim some form of elder abuse and attempt to tie up the funds, etc. Their interests are not aligned with yours...ergo that is why an elder bar attorney is important consideration

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Kaight | May 22, 2020 | 1,192 posts since 2011

While I agree with alan 1, I'm guessing the father remains alive. The OP should have used the word "assets" instead of the word "estate", which does indeed suggest the father is dead.

That said, the OP should be aware of option to add names to the CDs, if father agrees, not as joint owner but as beneficiary. You need to add two payable on death beneficiaries to increase insurance to $500k. But the money would still belong solely to father while he remains alive . . . if he is indeed alive.

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GMOTM | May 23, 2020 | 5 posts since 2020

OP here. You have given us much to consider! For now, we have decided to sit tight, as the CD's mature early this fall.. Before then we will meet with an estate attorney for advice on how best to protect his assets.
Again--thanks for the advice, and especially the good points we had not considered!

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CuriousDave | May 23, 2020 | 233 posts since 2018

Based on all the facts submitted, it appears that the elderly senior's assets are all held in his personal name and that no probate planning has been done, such as titling some assets in a trust or in one or more pay-on-death (POD) accounts. If that's true, this may be the time to consult an attorney with a specialty in estate tax planning to discuss possible re-titling of some or all of the assets, especially if this senior owns significant other assets such as a personal residence. In the event of an estate, permission wil be needed from the probate court to approve of the will-appointed co- executors, to authorize them to act on behalf of the estate, and to make distributions to beneficiaries in accordance with the provisions of the will. Assets left to descendants outside of a will, such as life insurance policies with named beneficiaries, or held in POD accounts or by trusts, all by-pass the probate process and avoid the problems inherent in that process (assets are a matter of public record, probate fees on assets left by will, and lengthy court delays).

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Anon456 | May 23, 2020 | 249 posts since 2011

I'm in Texas, and probate is not really expensive or a problem, but I still use POD all the time to protect funds if over 250K. Each different POD account will get its own 250K FDIC protection, so suggest you do 1) indiv, 2) indiv with POD person 1, 3) indiv with POD person 2 .... etc. Don't put multiple people as POD on the same account. That will only get you 250K on it. List each account with a different POD to get your coverage.

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alan1 | May 23, 2020 | 877 posts since 2015

To GMOTM: I just want to reiterate that you should use the FDIC's Electronic Deposit Insurance Estimator (EDIE) to figure out deposit insurance limitations. Please, please do not rely on the above comment, or on anything that I (or anyone else here) might post purporting to "explain" how FDIC insurance works.

EDIE is at https://edie.fdic.gov/

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GMOTM | May 24, 2020 | 5 posts since 2020

alan1--thanks for your input. Yes, I've used the FDIC edie app--tried several different "scenarios". It's very helpful!

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