By Ronni Gordon, Next avenue
Would your loved ones have the necessary access to your bank accounts after your death to help you fulfill your last wishes and manage the arrangements? Chances are, they won’t unless you take some essential steps now.
“If you have a bank account in one person’s name, it can take a long time to access it,” says Chester Spatt, professor of finance at the Tepper School of Business at Carnegie Mellon University in Pittsburgh.
To avoid this problem, you can designate a Beneficiary to your bank accounts such as CDs, checks or money markets through what are known as accounts payable on death (POD), sometimes referred to as transfer on death accounts or Totten accounts.
Transfer assets easily
Such accounts do not pass approval (the legal procedure for transferring your property to your heirs, based on the law of the state where you have resided). It’s also a way to give your heirs quick access to funds without creating a living trust, an estate planning tool that also avoids probate but is more complicated to create.
“These are an efficient way to transfer assets without too much hassle,” says Randy Fox, a Chicago-based certified financial planner with Two Hawks Consulting and a philanthropic estate planning specialist.
When opening a bank account or modifying an existing account, all you have to do is ask the bank to give you the form to designate a person (or more) as beneficiary “payable in the event of death” . “We think of the beneficiaries [when it comes to] retirement accounts or life insurance, but payable on death would be the same, ”says Spatt.
However, a withdrawal from a POD account still takes time, as the beneficiary must present the bank with a death certificate as well as identification.
“If you have a child, a transfer in the event of death to that child is straightforward,” says Michele Feinstein, lawyer and assistant professor of law at Western New England University School of Law in Springfield, Mass. Or if you have two or three adult children, says Feinstein, you could name them all.
“But,” she adds, “society is not that simple these days, when you have multiple marriages, children from different relationships.”
Advice on joint accounts
Chanel Reynolds offers an alternative strategy. Reynolds berated herself after her husband Jose Hernando died in 2009 in a bicycle accident and they failed to sign their wills, which were therefore invalid. His advice for allowing your loved ones to access your bank account after your departure: “You can create a separate bank account which has the status of co-owner.”
Accounts held jointly or with co-owners also bypass probate and are generally straightforward when held by married couples. But, says Feinstein, they “can lead to many unintended consequences.” If you have a joint account and the co-owner has creditors, she notes, “they can wipe out your money.”
And while no one wants to think about it, Fox presented another dire scenario: If you make your heir a part owner on your account, “that person can take the money the day after you invest.”
If you don’t have a will and your bank accounts don’t have any designations payable on death or joint owners, the state decides what to do with them. In addition, no one will then be able to access the money until your estate is probated.
Whatever strategy you want to use, make sure your bank has a copy of the POD or Joint Account forms and that the named person (s) know they are on them.
Having important papers like these everywhere can lead to chaos for survivors, says Barbara Bates Sedoric, a former estates and trust paralegal in Rye, NH. of their spouses.
How to help your loved ones
“I would spend days rummaging through desk drawers and browsing basements and attics looking for important documents and information,” says Sedoric, who created The LastingMatters Organizer ($ 20 as book downloadable electronic; $ 29 for the pocket version) which allows you to convey your wishes and keep track of your documents.
You’ll also need to remember to update your documents, says Kimberly Foss, president and founder of Empyrion Wealth Management in Roseville, Calif.
“Everyone is different, but on average, every three to five years is recommended,” she says. “A little attention to these details now can save immeasurable stress and grief in the future.”