Southwest Florida

So You’re Named as a Beneficiary. Now What?

Beneficiary checksI’m as guilty as any other estate planning attorney when it comes to telling clients with very small, simple estates and whose only goal is to avoid probate to “just name your child as the beneficiary on everything. When you die, he just needs to present a death certificate, fill out some paperwork, and he’ll have the money in a matter of days, not months.”

Technically, it’s good advice in the right situations. And it’s easy and costs nothing – just go to your bank or add their name on a beneficiary form.

But, what we tend to forget is that while it’s certainly a less expensive and quicker way to transfer property at your death, in real life it’s not always quite that “easy” for the beneficiary. This was brought to my attention recently by such a beneficiary.

Mom recently died. She was smart and saw an estate planning attorney (not me) years ago and set up a revocable living trust with her two adult children as successor trustees and equal beneficiaries. Her lawyer wisely transferred her home into her trust, and likely reminded her to retitle all of her other assets (bank accounts, investments, etc.) into the name of the trust. But, like many people, she either forgot his advice or chose to do what was familiar and comfortable for her – use joint owners and payable on death accounts.

The good news is that by the time she died, all of her assets were either in the name of the trust or had a joint owner or a beneficiary named on them, so no probate was needed. Yay!! But at the time of her death, her daughter, Sue, who was named as the first successor trustee, was located overseas for work and wouldn’t be able to come back to the states for a year. Sue was the detail-oriented, organized child – a perfect choice as successor trustee. But she had to decline to serve because of her situation, so her brother, Matt, stepped up. Matt had been named as the backup successor trustee. Matt’s a great guy – honest, hard-working and intelligent – but admits he’s not as organized and detail-oriented as his sister.

So, Matt brought a copy of the trust, a death certificate, a new tax identification number for the trust, and his sister’s declination letter to the bank and was able to easily open the new trust account that he would control as successor trustee. The assets from Mom’s account in the name of her trust were transferred in minutes to the new trust account. He was given a checkbook, debit card, and online banking. He now had access to cash to pay Mom’s final bills and then distribute what’s left to himself and Sue. Easy-peasy, lemon squeezie. Matt was feeling pretty good about things; if the trust part was this easy, surely the accounts with beneficiaries would be even easier.

So he contacted the Big Bank where Mom had added Matt and Sue as beneficiaries on her bank accounts. After calling the local branch, he discovered that he had to call their Estate Department. He called, and after waiting on hold for an hour, finally got a live person. Before he could say anything, the call dropped! So, he called back, and after another hour on hold finally was able to explain that his mother had died and that he and his sister were the beneficiaries on her two bank accounts. Of course, they wouldn’t allow him to take any action on behalf of his sister – he was told she would have to call them herself. Nearly an hour later, he hung up the phone with the uneasy feeling that the person on the other end (whose first language was obviously NOT English) didn’t really understand what he needed. But she had said a package would be mailed to him and he’d just need to complete the forms, sign in front of a notary, and send them back. Well, he did receive the forms a few days later. But they were only for one of Mom’s accounts and listed his sister, not his mother, as the deceased account owner! Totally messed up. Back on the phone…

The annuities were even more fun. The bank’s investment firm showed the annuities on a statement, so he called the bank. “No”, they said, “you have to call the insurance company directly – we don’t handle that.” (Annuities are issued by insurance companies). He called the insurance company – one of the largest in the world – and it took him three hours to finally get to the right person! I haven’t heard whether the paperwork they sent him was correct – I hope it was.

Things for Sue are going to be even more difficult since she’s overseas in an “undisclosed location” in a different time zone with no access to a notary (I was able to recommend a remote online notary, but not all states accept that yet).

Anyway, the point is that while naming beneficiaries may seem “easy” and retitling assets into your trust is “work”, if you truly want to make things go as smoothly as possible for your loved ones, use your trust.

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