Important PSA / Soap Box in light of what's happened with Boxx & WakeJunkie

[Coytee]

This is a PSA and I know that many will have read my concerns before.  If you haven’t then I hope this resonates with you.

 

We’ve recently lost Boxx and as of today, looks like Wake Junkie was given a scare with a second chance.

 

I think we all know intellectually that nobody is guaranteed ‘tomorrow’.  Hopefully, this will kick-start everyone into some reviews of your affairs and get things in order.

 

Do you have a checking or savings account that is in your name alone?
Do you have a brokerage account (non-IRA) that is in your name alone? 
Do you have any of the above that are in joint name with a parent or spouse?

Do you have beneficiaries on ALL your accounts, INCLUDING your 401K? 

 

In all the above examples (and for sake of keeping this post short, I’ll not (yet) get into any details…..if the thread withers away, it withers away.  If it creates another round of discussion then I’ll carry on as I’ve done in the past (or you can maybe search and read my old comments)

 

EVERYONE should go to your bank and put a “POD” (Pay on death) designation on EVERY account at your bank.

 

“Oh, but Richard, I have a WILL that takes care of that”

 

Bunk.  You are living with false confidence. (though technically, the statement is correct)

 

The Will simply says who gets it and that’s all.  The Will (for lack of better word) actually DICTATES that your things go through probate prior to your children getting them.  If you put a POD on your checking account, it will bypass probate and go MUCH quicker and much easier to your loved one(s).

Brokerage account(s)….  Put a “TOD” or Transfer on Death designation on them.  Again, a TOD (like POD) supersedes your will and allows the asset to totally bypass the probate process.

 

Oh, but I have my 40 year old daughter as my joint owner.  BAD BAD BAD idea.  Why?

 

Suppose she’s involved in a car accident or something in life (divorce?) where she gets sued.  All of “her” assets (1/2 of your account) can be attacked…..  do you want to have YOUR account involved in HER situation?  NO.  The way around it is make her POD/TOD beneficiary, give her power of attorney and be done with it.  You are now totally protected from her creating an issue.

 

I doubt that Boxx had any remote fear of anything being an immediate threat to him.  I doubt Wake Junkie expected his stroke.  Fortunately for Wake Junkie, he’ll read this and his light bulb will go off as to the wisdom of this thread.  Everyone understands and jumps to do these things once they've been awakened.

 

I'm just trying to wake you up prior to a more serious event waking you up (or perhaps, not waking you as in the case of Boxx)

 

Everyone (and I mean 100% everyone) needs to do something like this.  If you love your family, why would you choose to do something that will make their life that much more complicated when, at the stroke of a pen, you can simplify it for them?  (NOT having a TOD/POD on your accounts is every bit as much of a choice as having them)

 

I challenge everyone to contact your broker, contact your banker…..ask about a TOD or POD and get the forms.

 

Just remember, POD is done at the bank and TOD is done at the brokerage firm.

 

I challenge anyone who actually DOES this to report back to the thread!!!

 

The gauntlet has been dropped.  Guys, (gals?) show your family that you love them enough to take care of some of the little details.

[Tarheel]

Thanks Richard.....all good information and a call to action.  I have been putting off changing my will which leaves my assets to my wife who passed away in 2010.  No other heirs except a sister who doesn't need what I will have left. 

Edited January 17, 2015 by Tarheel

[minermark]

Cool, never hurts to do the right thing for free. good info. :emotion-21:

[billybob]

Have a TOD on my stock trading account.

[eth2]

Most importantly, consider an irrevocable trust to protect your assets in the event of a serious illness. A hospital/physician/nursing home can deplete your estate in a blink of an eye.

[eth2]

And remember, it takes years to protect your assets from the time you set up the vehicle you choose.

[muel]

Thank you!  There are a couple of things I've neglected from your list even though I know better.

Would you treat IRA accounts the same as 401(k) I assume?  I need to double check some of those accounts!

[Coytee]

Thanks Richard.....all good information and a call to action.  I have been putting off changing my will which leaves my assets to my wife who passed away in 2010.  No other heirs except a sister who doesn't need what I will have left. 

 

To let you know what I'm thinking if you are the person on the other side of my desk having a first meeting and I discover the above?

 

"you are in a train wreck that has yet to materialize itself"

 

If YOU passed today and your IRA (for example) has your wife on it as beneficiary, then your funds go from you.....to her estate....  and your son/daughter (should you have one) would ultimately get your funds (after washing it through your wifes estate) BUT, your children will then have to pull it out as a taxable event instead of being allowed the choice to continue the IRA as a "stretch IRA" or "Beneficiary Distribution Account" (depending on what title you like)

 

You now have one layer of complication (your wife gone) and yes.....should update your info....YESTERDAY (seriously)

[Coytee]

Have a TOD on my stock trading account.

 

You sir, will be given the day off from the mandatory Marie Osmond listening session!

[Coytee]

Thank you!  There are a couple of things I've neglected from your list even though I know better.

Would you treat IRA accounts the same as 401(k) I assume?  I need to double check some of those accounts!

 

All your IRA and 401K accounts (actually, you should only have ONE 401K account, any old 401K's should be sitting inside your IRA)

 

I digress on that.

 

All your IRA and 401K accounts should have a named person as your beneficiary (not your estate and not a trust unless you have a very specific reason (and there are some))

 

I ran into a situation where someone passed (61 years old).  Had $500K in his 401K and had NO beneficiary listed.  Zero, none, nada.

 

Fortunately, because his wife was listed on his death certificate as surviving spouse, she was the presumptive beneficiary and was allowed to put it into her name.  The BAD news here is, she died (at age 59) about 4-8 weeks later and I barely had enough time to get HER beneficiary elections processed with the company.  Had we failed in that, the funds would have gone from Dad to Mom and then mom passed....with no beneficiary and the funds would have had to come out as a taxable distribution to the kids. 

 

Fortunately, I had enough time to get the entire mess organized for them (401K and four IRA's all held at other firms, both IRA's had spouse only as beneficiary without contingent.

 

 

 

 

Which reminds me:  Always list a CONTINGENT beneficiary

 

What if you & your wife are out to dinner and involved in a fatal accident?  If you don't have the kids on there as contingent, they're screwed. (meaning they have some important options taken away from them)

[Ski Bum]

If YOU passed today and your IRA (for example) has your wife on it as beneficiary, then your funds go from you.....to her estate....  and your son/daughter (should you have one) would ultimately get your funds (after washing it through your wifes estate) BUT, your children will then have to pull it out as a taxable event instead of being allowed the choice to continue the IRA as a "stretch IRA" or "Beneficiary Distribution Account" (depending on what title you like)

 

You now have one layer of complication (your wife gone) and yes.....should update your info....YESTERDAY (seriously)

 

Little known loophole with Roth IRAs.  The gov't hates that this exists, and will disqualify them if there is a single typo on the forms, but if you title the IRA properly it can be passed un-taxed to heirs.  Check with your accountant for the specifics on this.  A tax-free Roth IRA is a fantastic gift to leave for your kids.  

 

Also, thank you eth2 for mentioning trusts, another great way to avoid probate and keep more wealth in the family.

Edited January 17, 2015 by Ski Bum

[eth2]

ANYTHING WHICH YOU WISH TO PROTECT FROM CREDITORS GOES IN THE TRUST!!!!!!!! HOUSES, CARS, BANK ACCOUNTS, AAANNNYYYYTTTHINGGG.

 

So for example, you have a massive stroke which leaves you in need of skilled nursing care - Medicaid will take virtually all of your assets before it begins to pay for your care. If your assets are protected in a trust, they can not be reached. However, it takes five years for your assets which are in the trust to be protected. So if you set the trust up today, you are at risk for five years.

 

(This is not legal advice, See your attorney for definitive information)

Edited January 17, 2015 by eth2

[dtel]

Great advice all, you never know

[CECAA850]

Thanks.

 

We had an atty that only does estate law draw up our will.  There are so many things to consider that only a professional would know.  We have things squared away down to our childrens childrens children in virtually every scenario possible.  This is a great topic.  Thanks for starting it.

[CECAA850]

(This is not legal advice, See your attorney for definitive information)

 

Good advice also and remember, it varies from state to state.

[Coytee]

Lest someone use "I've not yet seen my attorney" as an excuse....

 

For the items I mentioned, you do not need an attorney.  Just turn your honky horns off for a couple hours and call your chatty banker and then your chatty broker.  Tell them you want the forms.  You simply have to declare who the beneficiaries are....and sign the stupid thing.

 

Now....if you're one of those unfortunate blokes who's investment account is held at Computershare....  I feel for you.  Welcome to the nightmare.

 

Open an IRA somewhere ELSE, MOVE the accounts from Computershare to the somewhere else IRA and then do it.

 

Computershare can be a thorn in the hiney.

 

If you own for example, three different stocks, all held at Computershare, they view it as three separate accounts.  They REQUIRE you to fill out their forms three times (one for each account) and then you have to get your signature "Medallion Guaranteed" (similar but stronger than a Notarized signature)  You send the forms back to Computershare and IF everything is perfectly done, you are done.  If you miss ONE thing, you have to do the entire process again.

 

If instead, you move your assets to a traditional brokerage account (via what we call 'ACAT') the three (or two or twenty five) different assets are now under ONE account and you need ONE TOD form and it does NOT have to be Medallion guaranteed.  Simple stroke of the pen and you're done.

 

Nobody should have any shares of anything at Computershare.

 

I had one guy who had (for example) 1,000 shares of ABC.  He wanted to do the TOD thing with his three children.  He wanted to keep them at Computershare so, I didn't argue.  (wish I had in hindsight)

 

Computershare will not allow you to have "one" account with multiple TOD beneficiaries.  No, they instead, have more forms and require you to split the stock (in his case) into three different amounts and each amount is assigned its own account number (and each needs Medallion Guaranteed) and then each account has a SINGLE TOD beneficiary on it.

 

Stupid stupid stupid.

 

What if you had 5 stocks at Computershare and wanted to leave it to your two children?

 

You now need to have 10 accounts at Computershare with each child listed as TOD beneficiary....

 

Don't do it that way.  Open a regular account, wherever you please.  Consolidate all those accounts into one account and have your 2,3,4,?? children as beneficiaries on the single account and don't sign a single Medallion Guarnatee.

 

Oh, and to rag on Computershare even more....  we did his paperwork.  We Medallioned his signature on all three forms.

 

Computershare got the forms (all stacked together) took the top form (that said to move 1/3 into TOD with his son) and they put 100% of the shares into that account totally ignoring the paperwork for the daughters.

 

We called them...  their excuse was "the paperwork says the son is 100% beneficiary"

 

Yes...  since YOU require us to split this into three accounts, each child is "100% beneficiary of their one third"

 

Oh, I see...  said Computershare...  Well, we need these forms....

 

No, wait....  you HAVE the forms.  Since you see it was your mistake, since you have the required forms (and medallion guarantee) in hand, can't you UNDO what you did and fix it as per the original submission?

 

Nope.  You need to resubmit all the forms again.....I'm very sorry........

 

Cripes.  What if the guy had croaked prior to discovering this?  Sorry sisters...you get nada.

 

It is SO much easier to deal in a single account.

[Marvel]

the mandatory Marie Osmond listening session!

At least she's looking good these days...

Edited January 17, 2015 by Marvel

[Coytee]

 

the mandatory Marie Osmond listening session!

At ;east she's looking good these days...

 

 

Perhaps I'm trying to keep her all to myself? 

[Marvel]

Seriously, thanks for this info. All of a sudden, I am feeling old and seeing things I should have done thirty years ago.

 

Bruce

[ChuckAb3]

Reporting back ... have had POD's and TOD's and beneficiary designations and a trust established for years. How many weeks or months does that free me from the Marie Osmond sessions??