BE AWARE OF PROBLEMS WITH TOD BANK ACCOUNTS AND JOINT TENANCY
I have recently been talking to people about TOD or transfer on death accounts.
Sometimes you think, well, I don’t really need to put my bank account in the name of my trust because my account says that when the primary owner of the account passes away, it’s transfer on death, it goes to a certain person. Well, that’s all good, but the problem is, that it’s still not in the name of the trust. While it can be something that avoids probate, the issue is, what about a problem with that other person who is the signator or who is the beneficiary of that account?
What if they, for example, file bankruptcy or there is a judgment against them or a tax lien? These are the kinds of things that I look at as part of my practice because I have seen the train wrecks for many years.
A TOD account means that person’s name is already on that account. And if that person has financial problems that they may not be telling their parent about who owns the account, that can tie things up. Yes, ultimately we can show that it’s not their money and we can get them off the hook. But do you want to go through all that?
A better way to go is to have the trust own the account and allow the trust to run its business as it does and be aware of any creditor problems that any of those beneficiaries might have so that we can set it up to where we are not just going to create a new problem by making that person a beneficiary directly of funds in the account, let alone in the trust.
So that is something to think about. A TOD account does not solve that problem. That’s the same problem you’d have, by the way, with joint tenancy. If you have a joint tenancy property you want to say, well, I want my daughter to have my house when I pass away, so you want to put her as a joint tenant right now.
Okay, what if the daughter has a tax lien? What if she is in a divorce and the husband says, I want to have that interest in the house? There’s all kinds of things that can come up as a result of having that person in joint tenancy on that deed, on that title. And that’s the same problem you have with a TOD account.
So we want to give you advice on all of those issues. There are things to think about that people don’t think about. And even estate planning lawyers that don’t think about those because there are issues they haven’t seen. I have seen them everyday for 27 years and that’s why we want to help you.