In the case of a mutual fund in which you have set up a TOD arrangement - 50/50 to your two children:
– you are correct, the account DOES NOT go through probate – i.e., the account passes “outside the will” if there is a will
– upon the death of the owner of the TOD account, the beneficiaries would contact the financial institution or the estate’s executor settling the account would do so
– the financial institution will instruct the beneficiaries regarding what it requires: typically an original death certificate + financial institution’s documents opening “new” accounts for the 50/50 new owners, all completed to the satisfaction of the financial institution
– upon satisfaction of the foregoing, financial institution will open a new account for each of your beneficiaries and transfer 50% of the original account’s holdings into the new account. New account owner can then do whatever he/she wants with his/her new account – liquidate the shares and take cash proceeds or hold the shares indefinitely
– in our experience, either beneficiary can proceed without the other – i.e., a new account is opened whenever the claiming beneficiary contacts the mutual fund and submits the paperwork. It might be simpler for both beneficiaries to proceed at the same time, but that’s not necessary. Under present tax law, each new owner gets a “step-up” basis (as of the date of death of original owner) for the inherited mutual fund shares so when he/she sells the inherited shares, gains are calculated based on the new basis as of date of death.
The whole estate planning process is overwhelming, I am starting to take baby steps to put things in place, but I am just not sure if my children are “ready” to be “briefed” on the plan when I end up finalizing one! My son, who does not care much about money at all, makes me nervous, my daughter is a freshman in college, don’t think she will be interested in learning about our estate plan during her college years, sigh! I had children late, I will be SO old the time when I have grandchildren…but I can also add them in the plan when the time comes!
Do you have a responsible siblling that can help guide your kids if worse comes to worse? What about a niece or nephew? We named my brother as executor with niece as back up and then our kids after that. My brother is extremely good with money and our kids respect him and he will be good at making sure things work out for them. Ditto my niece, tho she’s not quite as confident about handling money, since her H handles it. She is their older cousin and an attorney. My kids are pretty good, but cousin is a few years older and an attorney, so she seemed to be a more logical selection for now. As the kids get older, we may adjust in a few years.
We have worked with an estate attorney who is a very nice guy. We are especially happy that he cleared title to two properties that had the names of many people who have passed away so that it’s now in H’s name instead of the names of so many others. One property is H & my BIL and the other is H. Both of the properties will pass to a revocable living trust after H’s death, get a stepped up basis and then pass to me, followed by our kids.
I understand that you don’t want to burden your college freshman daughter and that your son may not be too interested at this time. IMO, these are precisely the reasons why you should start to take housekeeping steps to organize, simplify, and put instructions and plans in place. So that should anything happen unexpectedly to you, they are not only left bereft but doubly burdened with having to settle financial matters.
Our D is a high school senior. We are not planning on telling her anything about the extent of her inheritance from her grandparents or her potential inheritance from us until she is much older as the amounts are potentially life changing and we do not want her to make her decisions based on that at this time of her life. She knows I’ve spent a great deal of time settling her gps’ estates. And I have simply engaged her in general conversation along the lines of – here are where all our files are, here’s where you can find information, and you should contact so-and-so for help if something happened to both your father and me.
When she is older (probably after she graduates from college but we’re not sure just when), she will be informed about the full extent of what she has in her own name. Soon after that, she’ll have to know more about our estates, especially as she’s our only child.
Not everyone has the luxury of planning one’s estate but, if you are able, you can start by taking small and simple steps to help expedite matters for your survivors.
Re: Beneficiary designation in IRA or POD designation in a community property state. Depending on state law, your designation may not be honored. Let’s say you have been married for all your working life. The money in the IRA is community property so 50% of it is owned by your spouse. Let’s say you want to give the money in the IRA to your children and not include the spouse, you’d have to get the spouse’s signed approval for that. Otherwise, he/she is entitled to her/his 50% regardless of the named beneficiaries.
Thanks for bring this up @TatinG. You are correct. If you designate someone other than your spouse as your PRIMARY beneficiary, the financial institution will require your spouse to sign off on the designation. There is typically a spot on the beneficiary designation form for this or the financial institution will come back with a request for the spousal consent. Hopefully, any designation of beneficiary(ies) other than a spouse comes with THAT spouse’s knowledge and agreement.
If you want to designate someone other than your spouse as primary beneficiary, it’s best to get spousal consent just to avoid issues in the future – such as moving to a community property state.
In our case, all financial accounts are JTWROS accounts so there is not a problem. @AttorneyMother, you are right, one mutual fund company’s TOD form that we plan to sign does have one section where it says if account is not jointly owned, the spouse MUST sign to give consent to designate others as beneficiaries. I just check, our state is not community property state.
The article mentioned a policy for a 55 year old woman costs $1,390 per year for potential benefits, wonder what kind of benefits it covers, $1,390 seems awfully low compared to various costs that I have come across.
A gentleman from one of the companies which administered our 457 plan at work had mentioned two long term care options to me, he was not selling me anything, I talked to him once in a while when he stopped in our department, just chatting while he was waiting for our personnel staff.
He told me to check into a rider with life insurance policy, exactly what the article refers to, however, I don’t think our current life insurance company has that. He also commented that since long term care insurance is quite high, and those who end up needing the care may not live that long (I guess statistically speaking?), they can self-insure, in our case, he thinks that is feasible since both me and my husband receive government pension so at least we can use that to support a good portion of the costs that go with long term care. Does that make financial sense?
I have been researching on need and cost for long term care insurance, but cannot come to a concrete conclusion for ourselves!!!
The only suggestion I have is that you consider all your potential financial resources when you look at funding LT care: SS, pension, proceeds from sale of your house (assuming that you will move into a facility), retirement assets. It’s possible that you won’t need to “fund” the entire projected amount (if any) with insurance but just enough to give you a cushion for peace of mind. It’s a cost-benefit analysis like with everything. It’s like personal policies for disability insurance – they’re very expensive but could be a life saver if one needs it to keep the wolves from the door.
For veterans and their spouses, there may be additional options. For indigent elderly, I believe Medicaid provides some long-term care benefits.
Hopeful820, if you or your H are current;y employed by the fed gov’t, there is a LTC plan available. We did this in 2002 when I was 41 and had just been diagnosed with leukemia and no good sense at the time of how things would play out. Was able to get decent coverage without medical eval with periodic increases in coverage. I think we pay $19/per pay period for mine. Since I’ve also had a heart attack since then, and am uninsurable, I am really glad we did this back then. My situation and experience is not typical, however!
This thread is reminding me why law school was never ever ever even remotely considered by me. Our wills are ancient. I’m having trouble remembering what TOD and POD stand for. (I looked it up, but it doesn’t seem to want to stick in my brains.) We’ve got one kids who is likely to be well employed and who has few desires. (He’s at Google.) And another who is a great kid, but his interests in international relations, non-profits and the like not to mention he’d loved to stay in the NYC area, all conspire to make me wish we could leave him more of the estate such as it is. The house is our biggest asset though we have a decent amount invested as well - mostly inherited, not our clever savings! Some IRAs, some small life insurance accounts, two very complicated vacation homes that we share with a jillion other people. I’d love to know where to begin and how you actually find a good lawyer. We did our will ourselves years ago. The lawyer who did our real estate deals said it was okay though it could be better - and we’ve meant to do something ever since…
@CountingDown, I don’t think federal retirees are eligible to enroll in the LTC plan unless I read it wrong. Just curious and plug some data into website, picked Plan D of $200/day benefit, 5 year benefit period, lifetime maximum benefits of $350.000, comes to $221/month at my current age. Thanks for sharing the info.
To find a good estate planning attorney, I interviewed a few (no charge) and asked for referrals from the banks that I have relationships with. Ended up hiring the sone of the late probate court judge, who was recommended by my relative who is corp counsel for a bank.
The attorney was great–came to our house and talked with H and me about our assets and desires and helped explain the options. The then came back with docs for signatures and cleared titles on several properties.
Will probably review our estate plan periodically–maybe every 5 years or with changes in assets, our or kids status, or tax laws.
Regarding the life insurance and LTC, many term & lifetime plans have an ADB, accelerated death benefit which allows you, at the time of being diagnosed terminal, to receive some portion (depends on the company) of the death benefit early.
Lately, some companies, Transamerica & Protective Life come to mind, have some riders which allow death, disability, and/or chronic illness riders- once again, different at different companies and varying by state, too. This could be a good way to fudge the LTC thing, get a life policy with a good sized death benefit, if you have a need to claim it early, great, use it that way, if you do not need the LTC, great, you have the death benefit. These are more recent additions and there is a lot of now you see it, now you don’t- you can get it in CA, now you cannot, now you can as the various regulations are addressed. I am thinking to get one for myself soon.