Continued from our previous blog entry, another great way to keep your assets out of probate is to take advantage of Joint Accounts and Transfer on Death Clauses. Typically, joint accounts tend to be checking or savings accounts at financial institutions that list two (or more) people as holders of an account. Upon the death of one account holder, it is presumed that whatever is left in that account goes to the surviving account holder. The only exception would be if the account was created for a specific purpose, such as to pay bills and expenses during the life of one of the account holders. This often comes up in a context of setting up a joint account only for paying medical bills or general expenses with an aging parent, however, in order to prove such intent, a person would need evidence to overcome the legal presumption that the remaining proceeds go to the surviving account holder.
There can be, however, a few unintended consequences with a joint account. One is that all named holders have equal right and access to those funds at all times. This arrangement could result in funds being withdrawn by another holder without notice. Another downside is that if a person is concerned about equal distribution of one’s assets to heirs, a surviving account holder could receive an unplanned windfall from those funds.
Another way to avoid probate is for a person to make use of Transfer On Death clauses, or T.O.D.’s. These clauses are often found in agreements with retirement accounts (401k’s, IRA’s, etc) and some financial accounts (such as money market or investment accounts). These agreements allow the owner of the account to designate a beneficiary. Upon the owner’s death, those funds go directly to the appointed beneficiaries, and those monies are not considered probate assets. Keep in mind, however, under Federal law, most tax deferred retirement plans (such as 401k’s) require that a primary beneficiary be a surviving spouse, unless that spouse gives written consent.
As mentioned previously, there are benefits of avoiding probate through these techniques. They help a person to shield assets away from the reach of creditors of an estate. Additionally, having assets fall out of probate help reduce the administrative costs and formality of transferring property through the supervision of a probate court. Through proper documentation and consulting with an estate planning attorney, you can help plan for the legacy you will leave your loved ones in a manner that will result in less hassle and cost, as well as offer greater protection against creditors. Contact the offices of Boyce Larsen today to schedule a consultation with one of our experienced attorneys today.