How to avoid probate on your bank accounts by making them POD, TOD or IFT
Kate: I've always been curious of this terminology, if assets are held in trust for or paid on death, what's the difference?
Attorney Tom Olsen: What we're talking about is how to avoid probate on ordinary bank accounts. We are not talking about IRAs and retirement accounts. We're talking about-
Kate: That's right.
Tom: -checking, savings, CDs, money market, investment non-IRA accounts. You can avoid probate on those by keeping them in your name only, Kate, but making them POD, payable on death, ITF, in trust for, TOD, transfer on death to your kids. They're all the same thing. Different banks use different terms, so it just depends on what term your bank is using. Maybe they're using POD, maybe they're using ITF, either one's going to accomplish the same goal.
Kate: Thank you for that. I never understood that, but thank you for making that clear to us.
Tom: You're very welcome, Kate. I appreciate it. What do you think, Robert?
Attorney Robert Hidock: I tell every one of our clients, even though when I do our Medicaid workshops, we always talk about estate planning, and one of the slides is about enhanced life estate deeds, and then I go into what you talk about in your workshop, that's just not good enough. Every single account that you have needs to have a beneficiary on it, POD, TOD, ITF, all in trust for, because I don't want anything ever to fall into probate.
Tom: We just a minute ago talked about the client's leave here with an action plan and the action plan at the top talks about what Olson Law Group's going to do for the client. At the bottom, it talks about what the client's homework is, and that homework, there's a specific paragraph in there, make your bank accounts POD, ITF, TOD, whatever your bank happens to use.
Then when the clients come back to sign their documents, we go through their homework list and say, "Did you make all your bank accounts POD?" They'll say, "Yes." I always ask them, "How did you do it?" "Sometimes you got to go to the bank and fill out a paper form." "Sometimes you got to go into the bank's websites and fill out an online form." It can be done. Different banks do it different ways.
Robert: I think that's part of the confusion. Different banks all have different systems and different methods. There's no uniformity. They have to put a little bit of work in to get it done, but it's worth it in the end. I had one unfortunate incident. With Medicaid planning, you're allowed $2,000 in assets, but if you have an account designated as burial, you can protect another $2,500 in it, and I always tell them, when you open that account, make sure you're the beneficiary because it's for burial. A person did not make themselves beneficiary, and the $2,500 had to be probated.
Tom: By the way, folks, when you're going to the bank, let's say you got three kids and you're making your bank accounts POD, payable on debt to your three kids, as a tool to avoid probate on it. When you make them the POD and you pass away, any one of your children can show the bank your death certificate, and they'll write three separate checks to your three kids. It is not the first kid down to the bank with a death certificate gets all the money. They'll write three separate checks to the kids, and the beauty of that is the kids don't even have to talk to each other, deal with each other. No opportunity for them to argue or fuss over this. It just couldn't be more simple.
When you're filling out that POD form, there's an additional box that says, [unintelligible 00:03:41] making it POD for your three kids, tell the bank, us, what happens if one of them happens to die before you? You can check a box that says, "Give it to my surviving two kids." Or you can check a box that says, "Take that child's share and give it to that child's children." There are choices to be made on these POD forms.
Robert: I can't really stress enough, Tom. We always talk about how sometimes money can make people funny, and inheritances really can wreak havoc on a family, but if you already have everything set in stone before you die and you have the beneficiary on your house and the beneficiaries on all the accounts, there's no complaining. There's not one favoritism to one sibling over another. You will make their lives a lot easier after you pass.
Tom: At the Olson Law Group, we talk about we're helping clients making things simple, easy, inexpensive for their children. That alone is a good reason, simple, easy, inexpensive, but it also means there's going to be less opportunity for your children to argue with each other.
Robert: Exactly.
Tom: That is so important these days that no parent wants to know that their kids are going to be arguing when they both pass away, and we can help them do that through the avoiding probate process.
Now, people want to avoid probate because it's expensive and it takes a long time. If you don't follow our advice and you say, "Tom, I don't care. I'm going to be dead. My estate will go through probate. What do I care? I'm going to name my oldest child as the executive person representative." You pass away, well, guess what? Now, all of a sudden, your oldest child holds all the cards. They get to dictate what happens, when it happens, how long it takes, and man, trouble is brewing the moment that happens.
[00:05:40] [END OF AUDIO]