|
|
|
|
|
| BANK ACCOUNTS AND STOCK ACCOUNTS Unfortunately, most of us pay little attention to the way we own our bank account. But, when we take ownership of an account, we are making an estate planning decision ... and we should consider this fact when opening an account. We have many choices. OWNING INDIVIDUALLY: When you own an account in this manner, it passes to heirs through your will (if you have one). If you have no will, it passes by your state's laws of descent and distribution. These laws, also called laws of intestacy, are slightly different from state to state. When passing by will or via the state laws of intestacy, your bank account goes through probate. Of course, this asset is subject to federal estate tax. OWNING IN YOUR LIVING REVOCABLE TRUST (LRT): If the owner of the account is "You, Trustee of your Living Revocable Trust," the account passes to the contingent, or standby, beneficiary. And, it passes without the need for probate. It is subject to federal estate tax. Owning an account in an LRT does not protect it from attachment by lawsuits. OWNING JOINTLY (JOINT TENANTS WITH RIGHT OF SURVIVORSHIP): If you and another person own jointly, the account passes to the survivor of the joint ownership. If you die, the other owner remains as owner. If you had put all the money into the account, it becomes a legacy to the survivor and is subject to federal estate tax. If the other person had put the money into the account, there is no federal estate tax at your death. There is no probate at the death of the first owner. Actions of either joint owner can subject the account to attachment by lawsuits. OWNING AS TENANTS BY THE ENTIRETIES (TBE): Many states have a form of joint ownership that is reserved only for spouses. A husband and wife may own as tenants by the entireties. The rules here are the similar as for joint ownership. Of course, there is never any federal estate tax at the death of the first spouse because he or she may leave any amount to spouse with no federal tax. Also, TBE gives a special protection from attachment by lawsuit because the TBE actually is a "third person," outside either of the two spouses. A lawsuit against either or both spouses does not subject the TBE property to attachment. OWNING AS Pay-on-Death: (POD): You may own an account in a manner which leaves it to a person who is named as POD. At your death, the account passes to that person. There is no probate. The account is subject to federal estate tax. A lawsuit against the POD person does not endanger your account while you are living. Some states do not use the POD term. They may have a form of ownership where one person owns "in trust for" another person. But, this form of ownership works just like the POD. OWNING AS POWER OF ATTORNEY (POA): If you want to own your account individually; but, want another person to be able to sign checks, you may want to own as "You, POA Other Person." This gives the other person signing authority while you live. When you die, the other person has no ownership because a power of attorney expires at death. Your account is subject to probate and to federal estate tax. However, a lawsuit against the POA person cannot attach to your account. OWNING IN A COMBINATION OF THE ABOVE: You and another person could own jointly ... with a POD to a third person or institution. A fourth person could be your POA. If you want our institution to be the owner at your death, you can list the account as POD to "The Foundation". |
|
