Estate Planning The Easy And Dangerous Way

As an estate planning attorney Weldon Springs, Missouri trusts, I often get questions about the use of non-probate beneficiary designations (e.g. “POD” and “TOD”).  This method of giving away property when you pass is often seen as, but is usually not, a panacea. This article will discuss why in Missouri non-probate beneficiary designations are sometimes good, often not good, sometimes awful.  

Missouri law creates the payable on death (“POD”) and transfer on death (“TOD”) non-probate transfers as a way to give away property when you die without using a living will or trust.  

An example would be Grandma Smith wants to leave her grandson Johnny Smith the proceeds of her bank account, the account is in her name “POD” to Johnny Smith.  This means Johnny receives the proceeds of that account when Grandma Smith dies. This type of designation is often created on a whim when the account is set up and often reflexively.

Now let’s say Grandma Smith, like many people, moves away and decides that her old bank is just too far away.  So she goes to Bank ABC and opens an account there, but forgets to add Johnny on as POD beneficiary. Then Grandma Smith dies.  Her account ends up in probate because when there’s no POD beneficiary named on Grandma’s account, it has to go to probate when Grandma passes.

Same example, but let’s say that when Grandma sets up the POD to Johnny account, Johnny is the only loving grandson she has.  A few years go by and she has two more terrific grandsons, Jimmy and Jerry. Then Grandma dies. Johnny gets the proceeds of the account and Jimmy and Jerry get nothing.  

Same example, but let’s say when Grandma sets up the POD to Johnny account, she is already old and Johnny is very young.  When she passes away, Johnny is still a minor. Now the account ends up in what is called a conservatorship. Johnny’s parent(s) will have to file a petition in the court where Johnny lives, obtain an order restricting the account until Johnny turns 18 and each year until then Johnny’s parent(s) will have to file an annual report from the bank and filed with the court.  

That’s just three examples.  I can think of many others. That’s because beneficiary designations are like dumb animals.  They can only do certain things. You can

Now what if I told you that Grandma could handle all of these problems with proper estate planning.  She could, for example, create a living trust and name Johnny’s parent(s) as successor trustees to manage the money for Johnny’s benefit until he is 25, or otherwise mature enough to not waste the money.  

The only downfall to doing traditional estate planning is the cost, which is relatively low compared to the cost of screwing things up for those you love.  There’s a hard cost to that, but also a time and PITA cost (pain in the butt) to things not being order. And the cost of estate planning is generally related to the complexity of your assets and family situation.  If you have relatively simple assets and goals, the plan is going to be relatively simple. If not, it will be more complex and costly, but that’s because it has to be the right type of planning.

Finally, remember that poor planning doesn’t become a problem until it’s too late to fix it.  Therefore, it makes sense for a person to proactively seek to have the right solution up front.  Sure, you won’t be around to deal with the mess if you don’t plan, but your loved ones will.

Remember what your doctor says:  “An ounce of prevention is worth a pound of cure.”   Just like estate planning.



Thanks to our friends and contributors from Legacy Law Center for their insight into Estate Planning.