POD accounts?

[curb1]

What is the name of your state (only U.S. law)? Oregon

This is a question that came up today. Are these statements contradictory? We have a relative who died and she had $220,000 in CDs with a POD designations. The first statement below would suggest that the CDs would not be part of her estate. The second statement is tricky. She owned the CDs a minute before she died on that day. The POD beneficiaries owned the CDs a minute after she died. She had no other assets.

We are trying to decide whether this qualifies for the "Small Estate Affidavit". Any thoughts?


1) "Accounts that may be designated as Payable on Death, or POD, include investment share certificates, share accounts, deposits, or stock deposits. Where an account is designated POD, the account will not be included in the owner’s estate at death."

2) "To qualify as a small estate, the property owned by the deceased on the day of death has to have been worth less than $275,000 with no more than $75,000 in cash or personal property and no more than $200,000 in real estate."

 

[anteater]

For purposes of small estates in Oregon, estate is defined as:

114.505 Definitions for ORS 114.505 to 114.560
.....
(3) “Estate” means decedent’s property subject to administration in Oregon.

The CD's with POD beneficiary designations would not be subject to administration.

 

[curb1]

Thank you. Actually, I came to that conclusion a few minutes after I asked the questions. Thank you for verifying.

I am now doing some radical thinking of taking all of our assets out of our family trust and making them POD and TOD accounts for simplicity for our three children (all adults). Oregon just (01/01/2012) started accepting TODs for real estate. I am now debating why the Trust would be a better vehicle than the POD and TOD accounts. Our family unit is very tight and I can see where the transfer would be so simple with the POD and TOD. My father's situation is very similar and I am considering doing same for him (he is 95 yrs.).

Has anyone given much thought to this kind of arrangement? What would be the pitfalls, I can't think of any.

 

[TrustUser]

just the normal reason why trusts are better than pods - a trust takes care of the situation when there is no pod.

for example, the pod dies and you forget to change the beneficiary.

a trust document is an all-inclusive document that will always have a beneficiary.

how many beneficiaries can be put on a pod ? many institutions have limits.

so if you want to give away all your wealth equally to your kids, for example, it may be difficult to do that with pods. easy as pie with a trust.

if you want those assets to have some protection from creditors of your beneficiaries, a trust can do this - a pod can not.

 

[justalayman]

just the normal reason why trusts are better than pods - a trust takes care of the situation when there is no pod.
.

aren't there also tax benefits with a trust that are not available with a pod?

 

[curb1]

Thank you.
I don't think there are any tax benefits for the trust.

Trustuser,
I agree that in many cases the trust can work better. My concern is the easiest distribution of assets to my children. When the second to die (of myself and wife) the trust would still hold the assets. With the POD (or TOD) the transfer of assets is immediate without the hassle of the trust accounting and legalities. Many (perhaps most) people struggle with handling and disbursement of trust assets.

Our situation is clean, no creditors/debts and everyone is very close and on the same page.

I am just trying to think of any reason why I (or anyone in a similar situation)shouldn't use this path. I didn't consider this until Oregon made TODs available for real estate.

 

[TrustUser]

not that i am aware of.

the federal estate tax is based upon everything the individual owns, trust or no trust.

and of course, pods are equally subject to the federal estate tax.

to me, it is simpler to have one document that states how everything is to be handled.

and certainly more complete.

i think if i really wanted to have certain funds go to john doe, i could see setting up a bank account with john doe as the beneficiary, as long as i could also have a trust as the backup beneficiary. that way i have a backup should something happen to john doe, and i forgot to change the bank account.

 

[TrustUser]

curb,

i dont see there being many legalities. especially in a clean situation as yours.

i am guessing that you will want to distribute evenly to your kids ?

just no way to do that with pods and tods.

while it is conceivable that you could create the same number of pods as you have children, and place equal amounts in them and NEVER TOUCH THEM. but not for all practical purposes.

and if you can control the value of the real estate in your tods, then by gosh i am gonna hire you immediately - LOL.

plus have you ever considered keeping the assets in trust for your children's benefit ? once in their hands, no way to protect them from possible creditors.

and take a guess at by far the biggest creditor anyone is ever likely to have ?

 

[curb1]

1) You said, "i am guessing that you will want to distribute evenly to your kids ?

just no way to do that with pods and tods." I don't understand. The PODs divide by the percentage to each beneficiary. A $10,000 account would be $3,333.33 to each of three children.

A TOD would transfer 1/3 ownership in the real estate until sold to each of three children. I don't know how this would differ from a trust. Or, in the case of stocks, the shares are divided equally and each child could sell or keep the shares of stocks.

2) You asked, "guess at by far the biggest creditor anyone is ever likely to have ?"

I don't know?

 

[curb1]

I found a good website about pros and cons of the real estate TOD:

REAL ESTATE LAW Transfer-on-Death Deeds

 

[TrustUser]

if you can place each beneficiary on all assets, then that does solve the equality problem.

if a beneficiary dies, what is the default legal solution ? if you are happy with that, then that does not make a difference.

biggest creditor is an ex-spouse. and most people have em.

it does not look like you like the idea of a continuing trust. to me, it is one of the biggest advantages of them. i like the idea of passing on protection and a sense of stability to children.

 

[curb1]

The problem I have is that managing the trust (taxes, attorneys, accountants etc.) can be expensive and time consuming for the average person. Most people are ill equipped for that besides not wanting to be involved with the hassle.

The PODs and TODs simply immediately place the assets with the individual to deal as they have with their own assets.

I appreciate your comments and I realize that in many cases (perhaps most) the trust would be the most beneficial. I have been involved recently with two different situations of elderly people who were set up with trusts by an attorney who goes to senior centers to offer free advice (to get business). These two situations were very clean/simple and could have been easily handled with PODs and TODs instead of much more expensive trusts. It just got me thinking.