Transfer on Death Planning

Occasionally you will hear or read that a revocable living trust is the only way to avoid probate. While it is true that a properly funded revocable living trust can avoid probate, and is an important estate planning tool, there are other options to consider. One popular option is joint and survivorship accounts and deeds. 

Gertrude came into our office and wanted to avoid the hassle of probate with regard to her estate. Her estate consisted of a home worth $80,000 that she purchased with her deceased husband in 1964, a checking account with $750, and a savings account with $1,700. She was living off her social security and a small pension. This allowed her to pay her bills, but she did not have much additional money for savings or legal fees. She lived at home with her daughter, and wanted to pass the home to her daughter upon her death. Someone had told her that the best option was to just add her daughter as joint owner on both the home and her bank accounts. 

While survivorship has its place, there are many pitfalls of which Clients are often unaware. When you add your child to the deed they are become an owner of the home with you. It is possible that your child may develop financial or legal problems, in which case your home could be in jeopardy. There are also potential tax issues that may arise depending on the specific fact situation. Also, if a child is added to your bank accounts, the bank may allow the child to withdraw funds without your authorization or consent. 

We suggested that Gertrude have us prepare a Transfer on Death Affidavit for her home, and name her daughter a payable on death beneficiary on both her checking account and savings account as well. The Transfer on Death Affidavit  allowed the home to pass to her daughter free of probate upon her death. By naming her daughter as TOD beneficiary on the bank accounts her daughter would likewise avoid probate and minimize legal fees in connection with the bank accounts. As a result, Gertrude was able to accomplish simple and easy estate planning at a very reasonable price.