Here is some additional information and follow-up questions – if you would like to connect directly, please email the listserv and confirm that you are willing to break anonymity for the purposes of this post:
The purpose of the TOD was to get it into the trust and the distribution of this asset as well as the other trust assets would all be handled centrally within the trust…the “avoiding probate fees” was a descripted added bonus of doing a TOD (per the financial advisor).
I doubted that advice and am questioning it, but I don’t do much probate work, so therein lies the question.
So, here is what my understanding is, and I hope others can either confirm or deny my analysis:
- I “assume” that this client WILL have personal assets outside of the trust that will require that an estate to be opened.
- Any banking or financial TOD/POD’s can be requested by the personal representative to pay any and all debts to the estate. (Per IA CODE 633D.8)
- Any of these TOD/POD accounts will be calculated as part of the decedent’s estate. ((Per IA CODE 633D.8(6) which reads: “Amounts recovered by the personal representative with respect to a security shall be administered as part of the deceased owner’s estate.”)
The question then becomes: MUST these TOD’s be counted as part of the estate? Or ONLY upon the written demand by the surviving spouse, a creditor, a child, or a person acting for a minor child of the deceased owner? (Per IA CODE 633D.8(2)).
I assume the easy remedy is to transfer ownership to the trust now, which will solve the TOD issue, but what other issues does that create for the trust? I assume if there are funds going in and out of the securities account it would cause a taxable situation for the trust…are there other obvious issues to be knowledgeable about?
I thank you all for your assistance, I really appreciate the thought provoking nature of this list!
March 26, 2018
Have you considered transferring the account ownership to the trust?
If the account is owned by the Trust at his death, it will avoid probate.
Section 633.31 is where the fees are calculated and is interpreted differently in every county. The only way to know right now is to call the clerk and ask. There is pending legislation on this that keeps going nowhere.
I’m a little concerned about your client wanting to “avoid probate” only for these assets. To be clear, if an estate is opened, you have to list them on the inventory.
Are you opening an estate? The TOD accounts should not be the thing that makes that decision for you.
If you have to open an estate, these assets will be listed on the inventory. So, they are not subject to the direction of the Court and pass pursuant to the designation (rather than the will/intestacy statute), but are included for purposes of court costs and attorneys’ fees. Additionally, depending on the beneficiary, they may be subject to inheritance tax (which can be a big mess).
Do securities and/or balances in checking accounts avoid probate if the is a TOD or POD named prior to death? I know Iowa Code 633D.8 says that any TOD transfers CAN be used to cover debts, taxes, and other things to the estate (if there is not sufficient funds available in the estate), but I cannot seem to find the explicit language in the code that supports whether or not these assets will be calculated within probate.
My understanding is that the asset was owned by the decedent and the instant the decedent dies then ownership instantly transfers to the beneficiary via the TOD or POD but this type of transfer being an asset of the decedent at the moment of death becomes an asset of the decedent’s estate. Therefore, if an estate needs to be opened, the transfer on death and payable on death accounts will become assets of the estate and will be included in the calculation of attorney fees and court costs. Is this the correct analysis? And if so, can anyone help me with the support for this conclusion? Code section(s)?
Long story short: Client wants to avoid probate of large securities account in the client’s personal name with a TOD beneficiary to his trust. My answer is no, it will be included in probate. What say you?
AskAnAdvocate is an anonymous listserv allowing Young Lawyers the ability to email inquiries anonymously and receive feedback. The list is moderated by ISBA staff and all Inquiries and responses are only shared after identifying information has been removed. To send an anonymous inquiry or response please send an email to AskAnAdvocate@iabar.org. View listserv guidelines here. |
To unsubscribe from this list, send a mail message to "unsubscribe@iabar.org" with the following in the subject and the first line in the body of the message:
unsubscribe aaa