In my two previous posts, I discussed the value of comprehensive estate planning even if you have a small estate or you want everything to go to your spouse. In this last installment, I will address the most common reason I hear from clients who say they don’t need an estate plan, which is, “I don’t need an estate plan because I have everything in beneficiary designation accounts.”
People often try to create a “do-it-yourself” estate plan by creating beneficiary designations on all of their assets. This is typically done by titling assets with another person “with right of survivorship,” holding assets jointly, or creating “payable on death” (POD) or “transfer on death” (TOD) accounts. I caution against using this approach for several reasons.
In California, you can have $150,000 in total assets (subject to a few exclusions) outside of a trust or without beneficiary designations without triggering a probate. Additionally, the threshold amount for transferring real property without a probate in California is $50,000. With TOD/POD accounts, if the designated beneficiary is deceased at your death and if no successor is named, the account goes back to your estate and counts toward the $150,000. The same is true if you are the surviving owner of property that had been owned “with right of survivorship,” which often happens with real property. If enough beneficiary designations fail or were never created, it is possible that a probate will be required.
Continue Reading You Need an Estate Plan (Even in Your 20s and 30s) (Part Three)