Do Inheritances Have to Be Equal or Fair? Is There a Right to an Inheritance? Part Two.

In the first part of this article we discussed the idea that no one except a currently serving spouse has a legal right to an inheritance. If timed correctly a person can spend every last penny they have and (as an old joke goes) have their final check to the funeral home bounce for insufficient funds! But that is not a really good plan of action for anyone.
So assuming that there will be some funds available at the death of the client (or at the death of the surviving spouse for a married couple), and he/she does have a goal of providing an inheritance of some amount to family or others, we now address the issues of equality and fairness in the bequests.

What is unequal or unfair? In some cases, unequal is actually fairer, and I had a classic case of this with a client who had a son and a daughter. The son was a Wall Street wizard and made a ton of money. The daughter was a social worker and, as everyone knows, social workers do not have the same compensation scale as Wall Street wizards. They were both doing hard work, but the son was clearly in a different economic situation than the daughter. Providing equally from the client’s relatively modest estate would have been an unfair result. It would have had a minimal impact on the son’s finances and a significant impact on the daughter’s. We thought through that and they ultimately did a non-equal share arrangement, but they felt they needed to explain their reasoning to their children in their Trusts. I told them I thought it was pretty obvious to their children why they did what they did but if it made them more comfortable, that was fine. In their case this unequal distribution to their children was actually the fair result. But I have had other clients with similar situations and they went the other way where equal won out, even though equal was not going to be fair. Again, I’m the advisor. It’s their choice. I advised differently but it’s their choice, their money, their family.

There is an additional challenge in the case of an estranged child. I get asked the question “Do I have to provide for my daughter, who I haven’t seen in years and who’s very mean to me?” Of course, the answer is no, but you should address that child in your legal documents in an effort to avoid potential legal issues down the road. You don’t want them to believe they were forgotten, but you don’t have to say bad things about them, either. You can just say something like, “I’m not providing for my daughter, [Name], in my Will (or Trust), for reasons well known to her.” And nothing further is needed. You’ve identified her by name and by relationship and you’ve specified that she’s not going to receive anything under the Will or Trust. That’s all there is to it. You don’t have to give a detailed laundry list of explanation. In fact, it’s better not to. There’s a whole history of cases where there are people who felt they were maligned or slandered in Wills and they sued the Estates and in some cases, they win.

While a client may feel strongly about telling the child in some detail the reasons they were disinherited, there is no compelling reason to do that and it can cause more problems than it is worth. If you think back to the basic premise in Part One, if the child or other individual has no right or entitlement to anything, you certainly have the right to say they get nothing. But don’t forget them. List them in the document so they know that it wasn’t an oversight. It was deliberate, but the reasons for the disinheritance don’t have to be specified. A legal case tying up your Estate for many years impacts all of your named beneficiaries and airing your grievance in your Will or Trust is simply not worth it.

So to sum things up. Only a spouse, even one from whom you are legally separated, has a right to a claim against your Estate. No child or grandchild does, nor does a former spouse (unless the divorce decree says otherwise). Since they don’t have any right or entitlement to an inheritance you can spend every last penny or give your remaining funds to charity. But if you choose to provide for family you can do so in whatever fashion you want, equally, unequally, not at all, in a lump sum, in a continuing Trust, etc.

In the next article we will discuss a related topic—the ever popular what happens to our money when we have a “future ex-son-in-law” or “mean daughter-in-law who I hope becomes an ex” situation? Stay tuned!

Reilly Law PLC Can Help You Accomplish Your Planning Goals–Whatever They May Be

Reilly Law PLC specializes in estate planning and administration. We call what we do Peace of Mind Planning and one way for our clients to achieve Peace of Mind is to know that their planning will accomplish their goals, including goals of fairness or equality of estate bequests. To learn more or to schedule a consultation, visit us online or call us at 703-579-1936 today!

Do Inheritances Have to Be Equal or Fair? Is There a Right to an Inheritance? Part One.

I recently read an excellent article by an estate planning attorney colleague that addressed the question of planning for inheritances and whether there was a difference between “equal” and “fair” distribution plans. But I thought the article started at the wrong place in the planning process. I think the starting point is to determine if you even want to provide an inheritance for family members. I get asked all the time—”but don’t I have to provide for my family?”

The answer to that is, “Heck, no.” There is no entitlement to an inheritance. Your children (or other family members—but I’ll use children here as that is the most common situation) have no expectation, or at least should have no expectation, that you will have anything left at your death for them. You may choose to, but that’s entirely up to you. You can, in fact, spend your children’s inheritance and in some cases, burn through that money and start relying on your children for financial assistance later in life. Of course, this is not necessarily the most desirable outcome from a financial planning aspect. The short answer is that there is no obligation, nor should there be an expectation of inheritance.

We have all seen the bumper stickers, “We’re spending our children’s inheritance.” Always good for a chuckle, but sometimes it’s truly the case. You have Mom and Dad out there in the big old RV, the bumper sticker on the back, and they are just living large and saying, “We don’t care. Our kids can fend for themselves. We had to.” There are others who will say, “Well, that’s just not right. You have to provide an inheritance for your children.” And, as I already said—you certainly can provide for them but you are under no obligation to do so.

There’s this kind of old-school belief that it’s something that a parent or grandparent must do. Oddly you hear this many times from people who got nothing from their own parents, so I’m not sure where that notion comes from, but it is something that is a reasonably common belief. It can be that they have to start with that idea as they feel a need to pass down certain legacy items for family members … family heirlooms, jewelry, furniture, things like that, and that’s fine. That may be the true nature of inheritance as opposed to significant sums of cash or investments, retirement accounts, things like that.

With that starting point … no right to an inheritance, can a parent make decisions that are in the view of perhaps some of their beneficiaries, unfair or unequal distributions? Of course, the answer to that question is yes. If you don’t have to provide for them, you don’t have to provide equally for them. You can provide in whatever fashion you feel is appropriate. It can be based on need, based on relationship, or based on whether a child remembered your birthday or not. It can be based on the work that they’re doing for you. If you are living with one child and/or they are spending a lot of time and effort helping you, you may want to provide for them differently than others out of gratitude for what they are doing.

In Part Two of this article we will go deeper into the idea of what is really equal or fair with regard to an inheritance.

Why Wednesdays Scare Me

Okay, I’ll admit it. Wednesdays scare me a bit, not because it’s Wednesday and not because it’s “Hump Day.” I have nothing against Wednesday the day. When I was growing up in New York, on TV commercials Wednesdays were called “Prince Spaghetti Day.” Not in my house, but it was a thing, I guess.

It’s not Wednesday the day. It’s what happens on Wednesdays. The town where my office is located, Occoquan, Virginia, is a tiny riverside enclave in Northern Virginia that borders Fairfax County and Prince William County, the Occoquan River dividing the two. Wednesday is garbage pickup day in town. Occoquan is a town of three streets by four streets, all pretty small and narrow and difficult to travel in any kind of traffic.

But Wednesdays, it’s garbage day, and no offense to our hardworking trash disposal experts, but they have a schedule to keep, and they are doing their best to keep it. They can come around corners pretty quickly. They can back up unexpectedly. As we used to say in my Navy days, you have to keep your head on a swivel and be alert and be listening and be careful. When I’m out walking our office dog, Lucy, sometimes she’s wandering, so I have to pull her in close once we start hearing them. But the good news is you can generally hear the garbage truck, and you can kind of prepare yourself for it.

Unfortunately, that’s not always the case with the dangers that are out there for us. I heard a story recently about the incredible number of people who are injured or killed in selfie accidents, trying to get that great selfie picture, an extreme selfie picture, leaning out over a ledge or stepping out into traffic. Just this week there was a woman at a zoo who crossed a barrier to get a selfie with a jaguar and the jaguar didn’t take kindly to it and attacked her. It’s frightening how much that has become a thing, people being seriously injured, disabled, or even dying as a result of trying to get that selfie picture.

Don’t even get me started on hybrid cars and the silent danger they present because, while they may be very fuel-efficient and good for our environment, I’ve been nearly hit several times by hybrids because you can’t hear them, and sometimes you don’t see them until they’re actually coming out of a garage or a driveway, so that’s a whole thing in itself.

What’s my point in all this? My point is risk and probability and the unfortunate likelihood that someone is far more likely to suffer from serious injury or illness or disability than a premature death, and being prepared for that. Obviously, try to avoid it if you can, which is not always possible, but should something unfortunate (or in the case of selfie incidents—completely avoidable!) happen, have your legal and financial affairs in order so that people can help you when you need help.

That’s the essential elements of what we call a Peace of Mind Plan or legal readiness plan, and statistically, it’s something that most people don’t do, particularly young people, even young families with small children because you’re young. Nothing’s going to happen to you. But it can, and it does.

So I use my Wednesday analogy to show that unexpected things can happen or even expected things that happen can happen in unexpected ways. Think back to former Secretary of Defense Donald Rumsfeld with his now infamous remarks about “known knowns” and “known unknowns” and “unknown unknowns.” There’s a lot of those. Secretary Rumsfeld may have been subject to some humor at his expense, but there’s some truth to all those concepts.

But one of the “known knowns” is that many people simply just don’t have a plan in place at all, and that the statistical numbers for accidents, illness, and disability are significantly greater than premature death. And as I said, there are some unusual activities these days that have increased some of these risks. Centuries ago, you might have livestock injuries or machinery injuries or various illnesses that were not able to be treated correctly or with the medicine at that time, and now those things have evolved into selfie injuries and, well, diseases that still can’t be cured or hybrid vehicle injuries or just car accidents, plane crashes, things that were unfathomable centuries ago that are now all too real, too common.

So, it’s not just Wednesdays that are scary, but there’s something we can do about it. Keep your head on a swivel. Make sure you stay out of danger. Don’t take selfies near wild animals, even ones that seem friendly. Listen for those garbage trucks and those hybrid cars. Stay safe, be alert, but have a plan in case something happens. Make sure that that’s not something that your loved ones have to worry about in an already difficult time.

A good Peace of Mind Plan will take put Wednesday back into its proper place in the week and maybe it will no longer scare me—or you!

Expecting the Unexpected

“Your heart attack will be tomorrow.” Some of you may have seen the TV commercial where a man is handed a note telling him that he was scheduled for a heart attack the following day. While clearly a fictional event, if you were given a day’s notice of an impending heart attack, stroke, or serious accident, what would you do? I would imagine that most if not all of you would work very quickly to get your legal and financial affairs in order to make things easier for your family members. But, since we don’t typically get advance notice that we will need to get our affairs in order, shouldn’t we make sure they are—just in case?

That is the purpose of the Peace of Mind plan. Since we don’t know what the future holds, other than there being a 100% certainty that, at some point, we will depart this life, it is critically important for us to expect the unexpected and leave our loved ones the tools they will need to take care of things when the unexpected occurs. We don’t have to look too far to get some examples. The recent snowstorm caused a number of serious accidents and injuries, not to mention a few snow shoveling related heart attacks. I think it is fair to say that none of the folks who were injured or died because of the snowstorm expected that to occur. One minute you are shoveling your driveway and the next you are collapsed on the snow. Or your car spins out of control on an icy patch and you are seriously injured. Let’s just look at someone seriously injured or incapacitated in the storm–what happens now?

The family of the disabled individual may have a long and costly legal process ahead of them. In the absence of a document such as a Durable General Power-of-Attorney, which appoints one or more trusted persons to act on your behalf if you become disabled or incapacitated, and even if you are married your loved ones may have to hire an attorney and begin a court proceeding to appoint a legal guardian and/or custodian to take care of your personal and financial matters.

None of us know what tomorrow will bring. Isn’t it worth the modest cost of planning ahead to give your family Peace of Mind if your tomorrow does not turn out to be a good day?

Learn more about Peace of Mind planning, including Powers-of-Attorney, at or at Reilly Law, PLC specializes in comprehensive Peace of Mind planning. We offer free initial consultations and special rates for military, veterans, and civil servants, as well as young family specials intended to get you on the right path.

Reilly Law, PLC is located at 300 Ellicott Street, Suite B, in Historic Occoquan. Our phone number is 703-579-1936703-579-1936. We know you are busy so we offer evening and weekend appointments. For convenience we accept major credit cards. As one client put it recently, not only did he get his legal affairs in order, he earned miles towards their next family vacation!

Facebook Ever After—New “Legacy Contact” Rules Allow Your Page to be Active After Your Death.

Until recently a deceased person’s Facebook page was, in effect, locked down by Facebook once they were notified of the death. This meant that no new content could be posted, and he word Remembering was shown next to the person’s name on their profile. Depending on the privacy settings of the account, friends could share memories on the memorialized Timeline and content the person shared (ex: photos, posts) stays on Facebook and is visible to the audience it was shared with.

Facebook recently announced a new option called a “legacy contact” that is essentially someone who the account holder designates in advance as the curator or digital executor of their Facebook page. As described by Facebook, a legacy contact is someone you choose to look after your account if it’s memorialized. Once your account is memorialized, your legacy contact will have the option to do things like:

  • Write a pinned post for your profile (ex: to share a final message on your behalf or provide information about a memorial service);
  • Respond to new friend requests (ex: old friends or family members who weren’t yet on Facebook); and
  • Update your profile picture and cover photo

You also have the option to allow your legacy contact to download a copy of what you’ve shared on Facebook but there are still limitations on their authority. Your legacy contact can’t:

  • Log into your account;
  • Remove or change past posts, photos and other things shared on your Timeline;
  • Read messages you’ve sent to other friends; or
  • Remove any of your friends

The key to this new feature is the appointment, in advance of death, of your legacy contact. It is a simple process. To add a legacy contact:

  1. Click in the top right of Facebook and select Settings
  2. In the left menu, click Security
  3. Click Legacy Contact
  4. Type in a friend’s name and click Add
  5. Click Message to let your friend know they’re now your legacy contact If your account is memorialized, your legacy contact will be notified.

The Help area of Facebook has more information about memorialization and how to add a legacy contact to your account. While this legacy contact concept may seem gloomy or distasteful to many, certainly those Facebook account holders with serious illnesses may want to consider appointing a trusted person to serve in this role to keep their legacy alive.

Benefits of Trusts for Average Folks

During a recent client meeting I was discussing the relative merits of a Trust-based plan over a Will-based plan given the circumstances of these particular clients. The clients said something which I have heard a lot over the years in various versions—“we are not wealthy people like Warren Buffett or Bill Gates, we don’t need Trusts like they do.”

My response to them is that we are not talking about the same kind of Trusts that Mr. Buffett or Mr. Gates, or the many family Trusts you hear about on National Public Radio, rather we are talking about Trusts for the purpose of providing a means for financial and life management while you are alive, even if you are disabled, as well as a means for an orderly, private, and quick distribution of your assets to your loved ones, to charities, or to whoever you choose, after your death, with the ability to provide additional protection for minor beneficiaries or those with special needs for years after you are gone.

I just received a very nice discussion of the many uses of Trusts for the average family from my friends at the Alaska Trust Company. Rather than try to improve on their excellent product I am including it in this blog post for your consideration.

Trust Situational Checklist

The client has concerns about family members or beneficiaries who cannot manage their financial affairs. In this situation the estate plan can contain a trust that will prevent beneficiaries from squandering their inheritance and protect them from creditors, lawsuits and divorces. In some cases, you may even be protecting the heir from other family members and friends who want to borrow money. The trust can be written in a way that will pass assets on to the beneficiaries immediately upon the client’s death, or the client can designate distribution over time in what amounts and even for reasons that they specify.

The client is on their second (or later) marriage and/or has a blended family. Families with second marriages and blended families present some additional estate planning challenges due to the various relationships involved. A potential hurdle is figuring out how to divide an estate when each spouse has children from a previous marriage. For example, in a blended family, the husband may use a trust to make sure that his biological children are the beneficiaries of his life insurance benefits. Without a trust in place, it is possible that his current wife receives the benefits and when she dies, that money would pass to her biological children, leaving the husband’s children with nothing.

> The client is concerned about privacy. Unlike a Will, which is public information, trusts are confidential. For this reason, people who want to protect their privacy can benefit from a trust. This can be helpful for clients who wish to maintain privacy over how and to whom their assets are distributed.

Your client is in a relationship without specific legal status. Unmarried couples miss out on the biggest estate tax break there is: the unlimited spousal exemption. The couple might assume that each will leave the other everything. While this is possible, the first to die will pay an estate tax and then the inherited assets will be Included in the estate of the second person, who will then have to pay an estate tax on the same assets. Ideally in this situation they should leave property in a trust for the other to avoid paying taxes on the same money twice. Unmarried couples also need to beware of the consequences of unintended gifting during life. Rules about transferring property freely between husband and wife do not apply in this case.

>The client has a disabled child. In this case, a special needs plan should be carefully designed to make sure the disabled child continues to receive their government benefits. Inheriting even modest assets from any source can cause them to lose important benefits such as health care and housing. A Special (or Supplemental) Needs Trust (SNT) can be created to ensure that they will be taken care of once your client is gone.

The SNT has two main benefits:

1. The beneficiary can enjoy the assets that were intended for their benefit without disqualifying them from important governmental benefits.

2. If the beneficiary lacks the mental capacity to handle financial affairs, the trust can be administered by either a family member and/or by a trustee who can look out for their best interests, giving your clients peace of mind.

>Client is a professional in a high risk occupation. Assets that are transferred through a trust can be protected from creditors, which may be an attractive feature for people in professions that carry a substantial amount of risk such as business owners, doctors, architects and lawyers.

>The client has a business or holds an interest in such a business. Passing the family business intact from one generation to the next is one of today’s most challenging estate planning problems. Especially, in situations where your client is trying to give the company over to one child who is active in the business while maintaining proportionate distributions to others who are not. Using a trust, you can help your client keep the family business in the family for years to come.

> Couples without children. Clients without children may be concerned about who will look a5er their financial interests later in life. By setting up a trust, they can appoint a trust company to serve as a financial fiduciary giving them peace of mind in case they are ever in a position where they cannot manage their own finances. Adapted from, and courtesy of, the Alaska Trust Company.

If Only All of Life’s Critical Issues Could be Resolved by “Pokemon Go!”

As I write this I can see what can only be described as a swarm of 20-somethings wandering around Occoquan, the quaint small town where our office is located, with their smart phones leading them to and fro. After some initial confusion on my part, I recalled a story on the news last night about the “Pokemon Go” phenomenon where the new app leads users to find game items via the GPS function of a smart phone. Admittedly seeing these millennials wandering around playing this game brought out my grumpy old man “get off my lawn” tendencies but then I started thinking about the possibilities.

The first possibility was one that was on the news last night telling stories of players who were so distracted they walked into poles, traffic, other people, etc., and/or suffered injuries of one sort or another. Apparently the game is not smart enough to alert users about these hazards. So I started thinking wouldn’t it be great if the game could incorporate some real life issues into it that would help the player “win” in some important areas like legal readiness and planning for their financial futures.

The hazard scenarios in playing the game could be addressed at the outset by asking the player if they had completed their organ donation card yet. Or had they given a loved on a Durable General Power of Attorney (DGPOA) to be able to take care of things for them if they became disabled? Even a dependent child if over the age of 18 (I am talking about your young “adult” college student or remain at home child here) needs a DGPOA or other legal documents to allow a parent or significant other to act for them in the case of disabling injury without having to go to court.

Similarly, what if the injuries sustained while playing were life threatening? Would the player’s loved ones know what they would want in terms of end of life care? Would they have the legal authority to act even if they did? And of course in the event of the ultimate tragedy of someone dying unexpectedly, there is no place in the “Pokemon Go” game for the player to get a Will in place before this sad occurrence.

Okay, so those are the depressing aspects of the “game.” So let’s look for an additional feature of the game that would tell players the importance of not just capturing creatures (or whatever it is they do—I am still not sure) but the benefits of saving early and allowing the real magic of compound interest to work for you. Or to set up a spending plan so they don’t run out of resources in the real world before they can get a money “recharge.” Or about the “free money” aspects of Roth IRAs or employer contributions to retirement plans. These could be considered “power up” parts of the game.

Despite my curmudgeonly tendencies these days I am happy to see young folks getting out and enjoying a nice sunny day, getting some exercise, and communicating with one another, albeit with a smart phone in their hands and having cryptic conversations about things I can’t understand. So, good for them. I hope that the less fun things I mentioned in this article are things they already have thought about and taken care of. I am not confident of that though, since statistics show that most people (of all ages) have not taken care of the essentials of legal and financial readiness. That is unfortunate. Not just for the person who becomes injured, disabled, or suffers an untimely death. But for their loved ones left trying to work through both the emotional impact of what is going on but also having to deal with legal matters or financial consequences. Too bad there is not game or app for that….

Milk, bread, toilet paper, [financial plan, legal readiness documents]: Winter Storm Preparation, DC-Style!

As I write this on January 21, 2016, we in the Washington, DC area are well along on our pre-snowstorm panic and preparations. Mother Nature was kind enough to give us a sneak preview last night with about an inch of snow at the evening rush hour which created all kinds of chaos. Now, facing the prospect of a foot or more of snow, and a legit blizzard as well, the rush to the stores started early. The storm essentials, milk, bread, and toilet paper, are already in short supply. But apart from those “essentials,” are you really prepared for this storm or, for that matter, whatever the future brings?

Sadly I can predict that there likely will be several deaths and serious injuries in our area related to the storm, whether through accidents, heart attacks while shoveling snow, home fires, or similar tragedies. While you may have stocked up on the storm essentials, have you prepared your family in case a tragedy strikes you or a loved one?

Part of your preparation should include a review of your personal finances. Specifically, you should do an insurance check-up to make sure that you know what insurance coverage you have, that all beneficiary designations are correct, that all premiums are paid to date, and that your family knows what you have, where it is, how to access it. Your family should also know about your various bank and other financial accounts, including retirement plans, IRAs, etc. If they don’t know what you have and where it is it will add unneeded stress at an already difficult time for your loved ones. Further, even if you have good records and your account information can be found, can anyone get access to your accounts with the proper legal authority and password?

On the subject of proper legal documents, an essential legal readiness plan for every adult (and that means anyone over the age of 18—even dependent students!) should include the following: 1) A Durable General Power of Attorney to allow a trusted person(s) to act for you on financial and other matters if you become disabled; 2) A Health Care Power of Attorney and Advance Medical Directive/Living Will to allow someone to make medical decisions for you if you are unable to do so; and 3) A Will or Trust to make things easier for your loved ones upon your untimely death. You can learn more about these at and take a free assessment of your own legal and financial readiness.

The bottom line, while your loved ones will appreciate that you have milk in the fridge, bread in the cupboard, and toilet paper at the ready, should something unfortunate happen to you they will appreciate even more that you were thoughtful enough to truly be prepared for bad situations.

Reilly Law, PLC offers a complimentary personal organizer we call a Peace of Mind Plan Roadmap. Send us an email at and we will be happy to send you the newly updated fillable PDF Roadmap document for your own use.

“Stuff,” Money, and Music

I think it is safe to say that for anyone who has spent time cleaning out someone’s house after a life changing event the words “I wish [Mom and Dad/Grandma/Aunt Mildred, etc.] had more stuff!” have never been uttered. I know those were not the exact words I have used during the clean-out process for my family members. There were perhaps other, less diplomatic, words used but nothing that indicated I wished there was more stuff to be dealt with!

I have had occasion to revisit this idea with even more mundane activities such as moving or cleaning out a garage or basement. We all have stuff, and we all keep accumulating stuff, and occasionally we sell, donate, recycle, or dispose of stuff, but over time there is generally more input than outflow. So we end up with lots of stuff – maybe even things we need and use pretty regularly.

But what about the other stuff that we have and don’t seem to need or use? We, or someone else if it was a gift, spent money on the stuff. Maybe it seemed like a good idea at the time but even with that it still involved the use of a limited resource – our income and assets. This is not an uncommon phenomenon by the way. All you have to do is see the many ads for shelving, storage bins, and other resources to help us manage our stuff and you know that accumulation is a part of our culture. But someday it is very likely that someone you love is going to have to deal with your stuff and I am pretty confident that they will not be wishing you had even more of it!

Which brings us to the third element of the story – music. No, I am not talking about the collection of vinyl records or, even worse, cassette or 8-track tapes(!), found in the stuff in the basement, but some lessons that can be learned from some recent songs.

The Zac Brown band has a couple of entries here. First is the sentiment that is the antithesis of accumulation: “I’ve got everything I need and nothing that I don’t.” In another song they touch on a theme which is a core tenet of Reilly Law, PLC and Safe Harbor Financial Advisors: “There’s no dollar sign on peace of mind.” Finally, Sheryl Crow summed up what could be a motto for those who are considering getting more stuff: “It’s not having what you want but wanting what you have!”

We all need “things,” but we don’t necessarily need more “stuff.” Knowing the difference between these two is the key to keeping accumulation under control – and just think of the money you’ll save not buying storage bins for other stuff you are buying and probably won’t use much (or at all) and will simply be left as part of the “treasure hunt” for family at some point down the road. Wouldn’t it be so much better to hear your loved ones say something like “Wow, there really is not much for us to go through” when it is time for the big clean-out? I know that I would have been very happy to say that!

How His, Hers, and Ours Accounts Can Really Cost You!

Many married couples make the decision to keep a bank or brokerage account in their own name without the other spouse having any access or visibility into the use of those accounts. Some folks call these “fun money” or “mad money” accounts and they are perfectly okay for married couples to have for purposes of their own choosing (presumably not for nefarious purposes though!).

The first problem arises in the event of the disability or incapacity of one spouse, as the other spouse will not have access to these accounts unless they have a valid Durable General Power of Attorney–and know about the account in the first place! Without a Power of Attorney the non-incapacitated spouse may have to go to court to get access to the other spouse’s money if they need to for any reason.

The second problem is in the case of death of a spouse with a “fun money” account in their own name. In the absence of a comprehensive estate plan most couples rely on joint ownership to transfer assets from the deceased spouse to the surviving spouse without having to go to probate. For example, a house owned as joint tenants or tenants by the entirety automatically passes to the surviving spouse at the moment of death. The legal process to formalize that transfer is just that, a formality. The same goes for a joint bank account.

In contrast, separately owned property, such as an individually owned bank account, or a brokerage account in one spouse’s name without any type of transfer on death designation, generally requires a probate proceeding to transfer the assets in the account to the surviving spouse. In some cases, a “fun money” account of a few thousand dollars will cost more to take through probate than the value of the account so it is often just ignored. If you get the image of essentially setting fire to a pile of cash you see the problem with this type of account. It definitely loses its character as “fun” money and now is better described as “make me mad” money!

While I certainly recommend a comprehensive estate plan of some type, at a minimum couples with accounts in their own name should race to the bank or brokerage and make their accounts a Pay on Death (or POD) account (for bank accounts) or a Transfer on Death (TOD) account for brokerage accounts. This type of account designation preserves your privacy during your lifetime–your spouse still has no access or visibility into these accounts–but it gives the bank or brokerage a person to transfer the assets to after your death rather than being required to pay it to your estate in a probate proceeding. This will save thousands of dollars and months of time.

Keep the “fun” in fun money by taking this simple step! If and when the time comes when a POD or TOD transfer is made your family will really appreciate it.