Pay-on-Death Accounts

A recent comment posted to my piece on understanding probate asked if Pay-on-Death cards should be used to avoid probate. The answer, in keeping with legal tradition, is that it depends on the situation.

Pay-on-Death (POD) or Transfer-on-Death (TOD) cards are types of a beneficiary forms, that when complete, make an asset non-probate. A POD is usually associated with banking accounts (savings, checking, money market), and a TOD generally accompanies a brokerage account. Upon the account holder’s death the asset will pass immediately to the person(s) listed on the card, avoiding probate. Advantages of PODs and TODs include an immediate transfer, whereas probate may take 12 to 18 months or longer. Also, by avoiding a probate transfer, the recipient is not responsible for the probate fee.

Two points of caution. First, a POD or TOD card may not provide ample room for contingent beneficiaries. And second, it is wise to have some assets remain under probate because money will be needed to pay final bills, taxes, and administrative fees. Funds left in your probate estate will be accessible by your personal representative to close out final expenses; otherwise your estate may be insolvent.

As always, it is wise to consult with an attorney or other trusted advisor prior to making estate planning decisions – including PODs and TODs.

Understanding Probate

Probate is one of those words that tends to strike a cord of fear in people, however, that does not have to be the case. Through some basic knowledge, the mystery and fear surround the probate process can fall aside, leaving people feeling knowledgeable and empowered.

Blacks Law Dictionary defines probate as the legal process by which the estate of a decedent is administered; generally it involves collecting assets, paying liabilities and taxes, and distributing the remaining property to the heirs. Key points to keep in mind when facing probate are:

• A will facilitates probate by telling the court how you want your assets and affairs handled upon your death – a will does not avoid probate;
• Probate applies only to your “probate property” – which is anything you own that does not have a clear designation on it about who should receive it upon your death. Common examples may include your savings account, home, and or car.
• Probate does not apply to your “non-probate” property – which is anything you own that does have a clear designation on it about who should receive it upon your death – called the beneficiary form or pay on death form or transfer on death form. Common examples include your life insurance and retirement accounts. These assets are passed according to the form, not your will.
• A fee is assessed by the probate court. In Wisconsin the fee is 0.02 percent of the value of your probate property. Other states fees vary greatly.
• The person in charge of ushering a decedent’s property through probate is called the Personal Representative.

While probate may take time, and requires a lot of attention to detail and paperwork, it is not unmanageable. And, if you feel it is beyond your comfort level or requires too much of your time, as a persoanl representative you can always hire an attorney to assist you in the process. Generally those fees would be paid with the decedent’s assets, not your own.

Art, Antiques, and Collectibles

Are you a collector? Whether it is contemporary art, 19th century furniture, first edition books, or comics, your collection should be included in your estate plan. To learn more about the issues surrounding planning and maintaining your collection, I’d recommend the book Life is Short, Art is Long: Maximizing Estate Planning Strategies for Collectors of Art, Antiques, and Collectibles by Michael Mendelsohn & Paige Stover Hagu.

Recently I wrote a review of the book for the Wisconsin Lawyer Magazine. Aimed at the collector instead of the estate planning attorney, the book discusses many issues, including heirs removing items before probate is finished, benefits of donating pieces to a museum, and the importance of appraisal.

As a collector, you obviously have a passion for a certain genre. Through a little planning and effort, you can make sure that passion lives on beyond you.

A Green Cemetary

Going green, a trend that is sweeping America has arrived in Wisconsin in the form of a land trust and green cemetery. This past year I was invited to serve on the Board of Advisors to the non-profit, Trust For Natural Legacies, which aims to preserve land in Wisconsin and have a small portion set aside for green burials. Not only is the concpet earth friendly, but it also offers a lower-cost alternative to pricey funerals.

Organization is Key!

Whether your estate planning documents are simple or run for a hundred pages or more, a key element to both is having them organized. As I always say to my clients and seminar attendees – if people can’t find your documents, then it is as though you never completed them. Here are 5 tips on organizing yourself:

One, purchase a three-ring binder and subject dividers. Mark the dividers “will”, “powers of attorney”, “instructions”, “beneficiary forms”, “important people to contact”, etc. Behind each tab place the appropriate documentation.

Two, if you put your will in a safe deposit box make sure you have a copy in your personal papers (that three-ring binder) that is clearly marked “COPY”, and indicates where the original is kept.

Three, make a list of all the bills you pay on-line. Should something happen to you, your personal representative likely will not have access to your email account, making it harder to track down those accounts, close them, and pay them off.

Four, make a list of your financial holdings. Include institution name, type of account, and a contact number. As your assets change over time make sure you update this list. Again, keep this in the binder listed above or in another obvious spot.

Five, tell people where they can find your documents. They do not need to know what they say, just where they can find them if something unexpected happens.

These simple steps can dramatically assist your friends and loved ones during what would be a very difficult time.

Madison Pride Day – July 20th, 2008

Saturday, July 20, 2008, Madison, Wisconsin will recognize Gay Pride Day. The agenda includes an address from Congresswomen Tammy Baldwin, followed by a picnic at Brittingham Park. Whether you yourself are in a same-sex relationship, or have a loved one who is, I encourage you learn more about how estate planning can enhance the relationship.

Since same-sex couple commitments are not legally recognized in the State of Wisconsin, partners live without basic rights and responsibilities. However, by taking action, you can bestow those rights and responsibilities on your partner. For example, you can name him or her as:

• Your power of attorney for health care (include a HIPPA waiver);
• Your power of attorney for finance;
• Your personal representative or trustee;
• Recipient of probate assets; and
• As beneficiary on your non-probate assets (life insurance, retirement, etc.).

Honor Those Who Give!

Friday, November 7th, the Madison Chapter of the Association of Fundraising Professionals will honor a variety of people and organizations who "have change the world with a giving heart". Nominations will be accepted through July 31st, 2008.

If you know of a situation where a person died and left a modest gift to a charity, which was put to great use, I'd love to hear about it! Currently I am researching and writing a book about charitable giving. The point I'd like to emphasize is that anyone can be charitable -- one need not be a Kennedy or a Rockefeller to make a difference in the world.

Have You Planned For Your Pet?

Are you one of the millions of Americans who have welcomed a pet into your home? If so, you likely lather your four-legged companion with love and affection, and dutifully visit the veterinarian. But have you considered where Fido or Kitty would go to live if you were unable to take care of him or her? Leona Helmsley’s will, leaving $12 million to a pet trust for her dog, has focused the spotlight on the issue of including pets in your estate plan.

Each year, thousands of pets end up in shelters because their owners died without making arrangements for their care. USA Today has a nice, simple article discussing the ins and outs of including your pet in your estate plan. Sure, a $12 million trust might not be the right fit for you, but leaving a letter with a plan for caring for your pet might. And don’t think a pet trust is just for the rich and famous; they can be funded will a small amount of money and may be appropriate if the person you would like to leave your pet with needs some financial assistance (i.e. grooming costs) or if your pet has a long lifespan (a Macaw parrot can live between 50 and 100 years).