Warning: The Danger of Relying Upon POD, TOD, and Beneficiary Designations As Your Estate Planning Strategy | Brentwood, Tennessee Estate Planning Attorney

As an estate planning attorney, I have devoted my career to helping clients achieve their goal in leaving a lasting legacy for their family and loved ones. As a result, I always review payable-on-death (POD), transfer-on-death (TOD), and beneficiary designations very closely to ensure that these items are completed correctly and accurately in connection with my clients’ estate planning.

However, I am routinely asked, “Dan, Why Don’t I Just Fill Out the POD Accounts and Beneficiary Designations. That Would Make Things a Lot Easier, Be a Lot Cheaper, and Avoid Probate.”

There are really three reasons why people may want to rely and focus their entire estate planning strategy on PODs and Beneficiary Designations:

  1. Avoid Probate
  2. My Financial Advisor Told Me To Do So or My Bank Clerk Said So When I Opened the Account
  3. I Looked It Up On the Internet

 

It is true that designating a bank account with a POD or designating a proper beneficiary may result in avoiding probate, in my experience, it tends to cause more problems (and cost more money) in the long run.

Take the cautionary story of Bob and His Beneficiary Designated Accounts.

Bob had two children, Billy and Jimmy. Bob owned a brokerage account, a checking account, a savings account, and an IRA. Bob followed his financial advisor and his bank clerk’s advice and named Billy and Jimmy as equal beneficiaries on all of his accounts. Bob also visited with an attorney and completed his Last Will and Testament. Due to Billy being more responsible, Bob named Billy as his executor.

After Bob died, Billy delivered the death certificate to the bank and to the financial advisor. All of the accounts were then transferred equally to Billy and Jimmy. Next, Billy hired a lawyer and began the probate administration. Billy knew there was a mortgage on the home and the funeral bill, but was unaware of any other creditors. The lawyer then filed a notice of creditors.

Under Tennessee law, creditors had a period of four months to raise a claim to the estate.

It turned out that three creditor claims were filed by a credit card company, the hospital, and a home repair company that was in the process of repairing the roof to Bob’s home. However, there were no assets left to pay the claims. All of the accounts were disposed of by POD and beneficiary designations. Billy told his brother that he needed some of the money back from the bank accounts to pay the claims, but Jimmy had already spent the money and refused to help his brother.

Billy was left with two choices: (1) pay the claims out of his own share or (2) file an action in the probate court to bring the assets back into the estate.

Billy ultimately felt it wasn’t worth it, and simply paid the claims out of his share himself.

Unfortunately, this is a very common occurrence in a probate administration. In an effort to make things easier, and perhaps to save on attorney fees, a person will name a beneficiary or a POD on a bank account or other financial account. However, the executor has a duty to pay all valid claims of the estate, and can even be held personally liable for failing to do so!

Therefore, before you take legal advice from Google or determine that all you need is PODs and Beneficiary designations, it is best to receive sound legal advice to determine the best estate legal strategy to leave a last legacy for your family!

Do you need more information? Please Click Here to Download My Free Legal Report on Estate Planning in Tennessee! If You Still Have Questions After Reading this Valuable Free Information, Please Contact Us at (615) 472-2482 or Fill Out the Contact Form to the Left of Your Screen to Schedule an Initial Consultation.

We look forward to helping you leave a lasting legacy to you and your family!

Daniel A. Perry
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Focused on helping seniors, individuals with disabilities and small business owners make informed decisions.
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