Dear Liz:<\/b> I was perplexed by your column in which you pooh-poohed pay-on-death and transfer-on-death accounts in favor of trusts. But you gave no specific explanation. <\/p>\n
Rather, you said trusts \u201cgenerally allow a smoother, more organized settlement of the estate than other probate-avoidance options.\u201d <\/p>\n
Would you please explain what is smoother and more organized than POD and TOD transfers? (Beneficiary deeds fall into the same category as POD and TOD, to my way of thinking.) <\/p>\n
These transfers simply involve a copy of the death certificate and some minimal paperwork. What could be simpler?<\/p>\n
Answer:<\/b> The fact that you asked this question suggests you may not be familiar with the many ways these transfers can cause unintended problems. An estate planning attorney could fill you in.<\/p>\n
One issue covered previously in this column is the fact that the person settling the estate typically needs money to pay final bills. If all the funds in the estate have been transferred to beneficiaries, the executor would have to beg for money to be returned (with no guarantee beneficiaries will cooperate) or pay the expenses out of their own pocket.<\/p>\n
Another obvious issue is unequal distribution if you have more than one heir. Account values can change over time, leading to sometimes dramatic differences in what the beneficiaries receive.<\/p>\n
Speaking of change, it\u2019s the one constant in life. A living trust allows you to easily update your estate plan in one centralized place as circumstances change. Altering beneficiary designations can take a lot more work, and it\u2019s easy to miss an account if you have several.<\/p>\n
Beneficiary designations offer limited contingency planning. If the beneficiaries die before you or otherwise can\u2019t inherit, the account could come back into your estate and be subject to probate. Also, many people forget to update their beneficiaries after major life changes, which can mean the wrong people inherit. More than one ex-spouse has received retirement funds or life insurance proceeds because the beneficiary form wasn\u2019t updated.<\/p>\n
Another unfortunately common occurrence is an inheritance that disqualifies a disabled beneficiary from receiving government benefits. You also can\u2019t control how money is spent with a beneficiary designation, which can be a problem if the beneficiary is a minor, an addict or a spendthrift.<\/p>\n
Plus, people get sued. Beneficiary designations offer no protection against creditors, while a properly written trust can help protect your assets and your heirs\u2019 inheritance.<\/p>\n
This is by no means an exhaustive list of the potential issues with beneficiary designations. They can be a solution for people with limited funds who can\u2019t afford to pay an estate planning attorney, or when they\u2019re part of a coordinated estate plan. Many people set up a trust for real estate and financial accounts, for example, and use beneficiaries for retirement accounts, notes Jennifer Sawday, an estate planning attorney in Long Beach.<\/p>\n
The more money you have and the more complex your situation, the more you \u2014 and your heirs \u2014 would benefit from expert, individualized advice.<\/p>\n
Liz Weston, Certified Financial Planner, is a personal finance columnist for NerdWallet.<\/a> <\/a>Questions may be sent to her at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the \u201cContact\u201d form at asklizweston.com.<\/a><\/p>\n If you purchase a product or register for an account through a link on our site, we may receive compensation. By using this site, you consent to our User Agreement<\/a> and agree that your clicks, interactions, and personal information may be collected, recorded, and\/or stored by us and social media and other third-party partners in accordance with our Privacy Policy.<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"Dear Liz: I was perplexed by your column in which you pooh-poohed pay-on-death and transfer-on-death accounts in favor…\n","protected":false},"author":3,"featured_media":111252,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[15],"tags":[11030,38545,13257,13978,70650,64,4219,70651,25146,524,25250,10767,12811,40900,3195,40901,44523,70652,24985,40903,3228,70653,70654,37634,40335,255,67,132,68,70655],"class_list":{"0":"post-135496","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-personal-finance","8":"tag-action","9":"tag-auction","10":"tag-authority","11":"tag-book","12":"tag-bribing","13":"tag-business","14":"tag-crime","15":"tag-crime-and-punishment","16":"tag-criminal-justice","17":"tag-currency","18":"tag-equipment","19":"tag-gavel","20":"tag-group-of-objects","21":"tag-guilt","22":"tag-industry","23":"tag-innocence","24":"tag-isolated","25":"tag-isolated-objects","26":"tag-judgement","27":"tag-justice-concept","28":"tag-law","29":"tag-law-book","30":"tag-law-enforcement-and-crime","31":"tag-legal-system","32":"tag-no-people","33":"tag-personal-finance","34":"tag-united-states","35":"tag-unitedstates","36":"tag-us","37":"tag-white-background"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@us\/115007005910212433","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/135496","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/comments?post=135496"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/135496\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media\/111252"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media?parent=135496"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/categories?post=135496"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/tags?post=135496"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}