#RichLifeLawyer Show 026: Estate Planning and Transfer on Death Designations

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I run around with a few financial planners and whenever we meet up they tend to pepper me with estate planning questions.

Whenever they ask me something I always file it away to talk about here because I know if they are curious about it most other people are too.

That’s why when I was asked about transfer on death designations a few weeks ago I knew I had to take a little time to talk about it.

This is one that’s covered well in the video, so instead of me writing any more, why don’t you just watch the video?

Cheers,

Christopher Small

P.S. Do you have kids? Have you completed guardianship paperwork? Have you done it correctly? Click here to find out what happens if you don’t do anything: Are you okay with a judge choosing the guardians of your children?

P.P.S. Do you own a business? Do you have a plan so the business, and your family, can survive if something happens to you? If not, click here to learn how simple it is to protect your business and your family from tragedy: 5 Ways to Protect Your Business from Catastrophic Failure.

P.P.P.S. Do you have no kids and think you don’t need an estate plan? Single and think a will is only for married couples. You couldn’t be more wrong. Click here to learn more: 5 reasons estate planning is a must have even if you don’t have kids.

Christopher Small is a Seattle estate planning attorney who helps people get rich and live forever. He is also the owner of CMS Law Firm LLC.

Transfer on Death Designation Transcript

Hey everybody, this is Christopher Small and this is episode twenty six of The Rich Life Lawyer Show. I’m super excited to be here with you today as always. I’m here on Facebook live if you want to be able to come and ask questions live and get them answered. Go and like my Facebook page. Just search for CMS Law Firm on Facebook. Like it, you will get a notice when I record these and you can see them first. You can also come and ask questions or you can ask estate planning questions, you can ask lawyer questions, you can ask personal questions, you can ask business questions, you can ask me whatever you want. I don’t care. But I’m here for you. So, just know that. Follow that and we’ll get going. So all right. Today though we’re going to talk about are transfer on death designations. This is another reader question on the questions basically transfer on death accounts. Are they good, bad, useless in Washington State and what are the pros and cons for estate planning. First of all, let’s talk about what a transfer on death designation is.

Normally this applies to real estate. It can apply to bank accounts. Those are kind of the two main places that applies. You can also think of this as simply as a beneficiary designation. Which you have on life insurance, you have on your retirement accounts, all these kinds of things they all have these beneficiary designations or transfer on death designations. They’re essentially the same thing. It just depends on who you’re talking to on what are called. Real estate, transfer on death, bank, transfer on death. Life insurance, beneficiary, 41K, IRA, we’re gonna be talking about retirement accounts, brokerage accounts. We’re going to be talking about beneficiary. So that’s the difference. Now, are they good, bad or useless in Washington. They are good. There’s nothing bad about them, except for one thing which we’ll get to at the end. They are good for many many different reasons. A) Transfer on death designations take place essentially right at death. For the person who is going to is named as the beneficiary on the account, all they have to do is bring in a death certificate and the money is basically transferred to them immediately.

With life insurance, you get a check cut. It’s super super fast. What also makes that good is that transfer on death designations of those assets of void probate. Now, those assets do not avoid estate taxes. If estate taxes are due, those, most of those assets do not miss out on creditor obligations. So if the person that’s died owes money to some people. Significant some amount of money. That, the money that’s given to people can be used for that and will be used for that. Even if it doesn’t go through probate. So those are two important things to remember but it does eliminate the need for probate at least for those assets. So that’s why it’s really good. With you have a trust, what you do is you make the beneficiary or the transfer on death designation to trust or you simply go transfer the assets into the trust. So, with transfer on death designations, they’re super good because they are a probate avoidance tool, essentially. Okay, let’s see what else. The Cons. Okay, the cons of transfer on death designations are simply if you forget to change those designations if things change in your life.

Whenever people come into my office the first thing I always ask him is, do you have life insurance? Do you have disability insurance? Do you have a will? The next thing I ask is, who are your beneficiary designations on all of your accounts? Are they current? A perfect example of this is a tragic story to set the tone but there was a couple. Okay, a married couple. They were going to, they were having a kid. They go to a hospital. I think it’s their second kid. Something happens while, during the birth, during birth. And the mother dies. Okay, tragic, tragedy. That’s a true story by the way. So the mother dies, she has a life insurance policy but the life insurance policy names her father as the beneficiary on the policy. Now the father hates the husband. Okay, for whatever reason. I don’t know why, not a fan of them. So what the father does, he gets the check from the life insurance policy and he keeps it. So he doesn’t give it to the son to use for his family.

He doesn’t give to the son these for his kids. Nothing, he just keeps it. That’s the downside to transfer on death designations. If you don’t keep them up to date, you can get really tragic results for your estate. Alright, so that’s it for today. There is no one here still, that’s fine. I appreciate you and I appreciate all of you that watch after the fact and I know that you do. If you have questions, email me chris@cmslawfirm.com. Come on here on Facebook live and chat with me. I’d love to see you and otherwise I will catch you later. Bye bye.

Originally published at cmslawfirm.com on August 17, 2016.