Justin, My mother recently set up a trust, and she asked me to look over everything to see if I had any questions. Everything looks right to me—she even retitled her home and brokerage account into the name of the trust. She didn’t change her checking and savings accounts, but she said she planned to add me to those. Do you have any other suggestions? – Dave
Dave, I’m glad to hear that your mother is taking steps to get things in order to avoid probate court, but she should think again about adding you to her bank accounts. Since she’s gone to the trouble of setting up a trust, it makes more sense to list the trust as the POD beneficiary of those accounts.
Adding a name to bank accounts can inadvertently mess up a person’s estate plan. In many instances, people will use their trust to divide their estate among all their children. But when you “add a name” to an account, that account goes directly to that person and isn’t necessarily divided as intended. This type of thing often causes disagreements after a parent dies.
This plan can cause trouble while the parent is living, too. Usually the point of an estate plan is to pass on assets after death, but adding a name to an account actually changes the ownership immediately. That means if the child added to the account goes through any financial or legal troubles, the parent’s funds are at risk.
To make sure you can manage your mother’s accounts while she’s living, you should be named her power of attorney. To make sure the accounts go where they’re supposed to after she has died without the necessity of probate court, directing those accounts to the trust is the way to go.
To read more about all the things you can do with a trust, pick up a copy of my book, You Need A Plan, at YourPlanMatters.com. To visit one on one with an attorney on this and other estate planning issues, give us a call to set up a strategy session at no charge. We’d love to help you out.