CHECKING ACCOUNTS
OFFICIAL MEMBER OF THE LONELY HEARTS CLUB
If there were a Lonely Hearts Club for assets, the checking accounts should be inducted. Why? Because it is the most often overlooked asset in the estate. For some unknown reason, clients are reluctant to retitle their checking account in the name of their Trust. Maybe it’s because so many don’t realize why this is so important. It is true that the account may not have that much money in it and, therefore, is not considered important. The argument is made that the money goes in and goes out. Keep in mind that the same can be said about your heart. The checking account is the heart of the Trust. There are three occasions when the checking account is needed and not accessible if it has not been properly titled in the Trust. In all three situations, let’s pretend that you’re not married or that you were, but your spouse has passed away. The first occurs when the then-acting Trustee is temporarily unable to write checks or when it would be impractical to do so. Let’s pretend you fall and break your hip. If you’re rushed to the hospital, it is unlikely that you will stop to grab your checkbook. If the account is registered in the name of your Trust, your
co-trustee has access to the account and can immediately take over and handle any bills that need to be paid. The second situation occurs when the “temporary” problem becomes permanent. In other words, your days of paying bills are over, but you’re
still alive. If the checking account is registered in the name of your Trust, it will take your Trustee seconds to take charge of paying the bills. The third situation is when you pass away. Again, if the account is in the Trust’s name, it will take seconds for the next Trustee to take over. Oh, by the way, none of this will happen if the account is a “POD” account. POD stands for “payable on death.” POD accounts get distributed on death, not on disability. We could also label it “FOD.” That stands for “frozen on disability.” Also, at death, a “POD” account is often payable to a person, not a Trustee. This means the Trustee doesn’t have access to the bank account to pay the decedent’s bills and settle the estate ... ever! This becomes a huge problem.
Many people try to solve this problem by adding a child to the bank account as a joint tenant (which is different than having a trust account with a silent partner trustee). Beware! This creates an even bigger risk because the child becomes a co-owner, which exposes you to their liabilities. In short, if you haven’t already done so, please go to your bank and re-title your checking account in the name of your Trust so it can join your other assets that are registered in the name of your Trust. And cancel the Lonely Hearts Club membership!
CORRECTION: Due to a printing error in May’s newsletter, the third sentence in the second paragraph in the article “What Are 529 Plans?” should read: “During life capital and earnings from the 529 are tax deferred for both federal and state taxes and if used for educational expenses, tax free. ”
2 PrestonEstatePlanning.com
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