Interesting. I did not find probate onerous in NY, but I had a lawyer handle it. It was not something I wanted to undertake on my own.
When I considered having my mother create a trust, another lawyer said that the cost of creating the trust would be close to the cost of probate, and I think he was correct.
Now, jym626 raises an interesting point about backlog.
One would guess there will be less backlog in states probate is easy.
Backlogs are hard to predict. I had a backlog on a real estate transaction due to a change in the state’s law on transfer tax…who knew when we scheduled a closing for early July that the “July 1- new law goes into effect” meant total and utter chaos and the lawyers for both sides BEGGING to postpone the closing a month until the backlog cleared?
I wouldn’t finalize an estate plan based on avoiding backlogs. They come and go, are impossible to predict, and pop up on items that you least expect. Do an estate plan based on efficient transfer of assets to the people and causes you care about and assume that a competent executor can manage delays, backups, screwups, etc.
I know someone still in limbo over an acrimonious divorce-- now THAT’s a backup! Their final hearing was scheduled for the day the local family courts shutdown for Covid. So the couple is still married to each other (hopefully resolved in a few weeks) and if you think that the years have meant a softening towards each other- you would be WRONG! The court has prioritized hearings where minor children’s interests need to be protected (can’t blame them for that) so a run of the mill "We hate each other, let’s end this toxic marriage) got bumped to the end of the line!
I’m not a lawyer, but one thing that should be considered is how any debts that are owed when you pass are paid. With a trust the executor can pay the bills and then distribute the remaining assets. Using TOD may not be a problem if you’re leaving all your assets to your children who presumably would agree to share the costs out of what they received. But if your TOD plan is more complex there may be disagreements among heirs in figuring out how your final debts will be paid.
One article addressing a bit of this is at Transfer-on-Death Accounts and Your Estate Plan | Kiplinger
Yes, very true. I’ve read that advise a few times (especially for people procrastinating writing a will… “it will all go to my spouse anyway”). In our case not a big deal for that small but real possiblity because it’s only our house that would go through probate, pretty straightforward in Colorado.
But you have to live somewhere, and usually it’s unlikely you pay less for the next home.
H & his mom own the family cottage. His mom put it outside the will/trust for whatever reason her lawyer suggested. If H dies before his mom, his mom owns it herself. Because of this, I have told H that we are not going to spend any significant sums of our money on it (aside from the expensive aluminum dock we paid for ourselves). I told him that he could be hit by a bus tomorrow (seems that’s a popular phrase), and I won’t get anything out of the deal. Not to be a you know what, but I don’t want to pay to significantly improve something I don’t own. H keeps saying that there’s no way his 96 year old mom will outlive him, but I never put my foot down like that, so H understands that this is important to me. Well … last weekend his childhood friend & her H were in a motorcycle accident. Her H died instantly. All of a sudden, my H is faced with the reality that bad things can happen in an instant. I think he’s understanding my POV a little better now.
Like they say- who paints a rented apartment or gets a rental car detailed? I’m with you, Kelsmom!
Not if we rent!
On the beneficiary topic, has anybody named a non-profit as beneficiary or partial beneficiary on a 401k/IRA account?
I have my husband named as primary beneficiary, kids as alternate. Contemplating designating my church for a small chunk of the alternate. (It an easy online setup, can change as desired down the road.)
I assume that the property is JT WROS (Joint Tenants With Right of Survivorship) as opposed to Tenants in Common? If the former, darn right it would make little sense to spend much on upgrades. (other than perhaps an investment – really donation – in paint so mom can have a brighter house.)
Yes, Joint Tenant WROS (will/trust stipulates the value is an “advance” on H’s inheritance, so his share is reduced accordingly). We have been taking care of it for years. His mom pays the basic upkeep, since it’s really still hers (if not legally, definitely in practice) & she still considers it as much H’s sister’s as ours as long as MIL is alive. We do all the work & make arrangements for anything that needs to be done. That part is all fine. It’s just sinking in money that we don’t have to spend where I draw the line.
True that
The article at How to Name a Charity as an IRA Beneficiary | Retirement Watch claims it may be preferable to create a donor-advised fund and list that as the beneficiary which in turn gives the money to the charity. I don’t know if the article is accurate though. And you’d need to make sure the church is an IRS-qualified public charity so the DAF can give to them.
According to the article
If you name the charity as a direct beneficiary of the IRA, when it comes time for the charity to receive the contribution, the IRA custodian must create all kinds of obstacles and paper-work. Most IRA custodians will require the charity to open its own account with the custodian or go through a process similar to opening an account. The problem is that financial services firms have to comply with the “know your client” rule under the Patriot Act. The charity has to provide the custodian with a lot of information about not only the charity but also its directors and maybe some key employees. That’s a lot to ask of a charity, especially if the contribution from the IRA isn’t substantial.
Maybe it’s worth asking your church if they’ve been the beneficiary of 401k/IRA accounts before. If they have they’ll know whether it was a hassle or not.
Thanks. That was a helpful article. We actually do have a DAF, but the Fidelity beneficiary designation screens are very simple… not sure there would be a way to specify DAF. I’ll check with church treasurer. I do know that there are rules about not restricting gifts (ha, easy to do when the form fields oly has room for name / EIN).
This statement was helpful, what I had assumed but do good to confirm - “ When your children or other beneficiaries inherit a traditional IRA, they pay taxes on the distributions just as you would have. They inherit only the after-tax amount. But when a charity inherits part of an IRA, it owes no taxes when the amount is distributed”. Too bad there can be hurdles on the receiving end.
My in laws set up a charitable remainder unitrust (CRUT), funded by an IRA. They get a percentage each year, three charities get 5% each year, and the three charities will split the remainder when MIL passes (FIL has already passed).
Interesting concept. I’m too young to be considering anything irrevocable short term, but I see the appeal.
Speaking of delays etc. A friend had a hoarder aunt die in CA, intestate. The proceedings, with the county running everything took over two years and a “surprisingly high” amount of fees deducted.
On trusts, one place they can be quite handy is that timing when the parent is failing, losing control, or easing out of control of financials. A parent who is trustee can resign and allow the adult child successor trustee to take over. It’s somehow more friendly feeling in some cases. We’ve all read cases of parents who should not be in charge of their finances and, for some, resigning as trustee is less scary than other decision options. Which is strange, but true, in some cases.
And if the spouse remarries and then dies, EVERYTHING could go to the second spouse. So theoretically a person briefly married to a widow/er could get everything both partners worked for/saved. Might not be what you want to happen to your kids/grandkids.
FWIW - that exact scenario happened in a family my parents knew. Husband and wife both worked hard for decades and ended up owning some profitable businesses. Wife passed unexpectedly, husband quickly remarried (to a woman who was a wealthy widow) and then died shortly after. His adult children did not get a penny either of their parents worked years for.
That’s a scary scenario. If he had an old will done the common way (all to spouse if alive, children as secondary beneficiaries) I assume 2nd wife would have gotten nothing. That’s why it is important (and common) to write or rewrite wills at 2nd marriage like my Dad did…. spouse/kids split. Too bad it didn’t happen here.