Ask Liz Weston

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Legal Matters

Q&A: Naming beneficiaries turns tricky

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Dear Liz: I have spent the majority of the last three decades abroad. Relationships fade away if there is little contact. Such is life. Most of the financial accounts that I have allow me to provide an organization as a beneficiary. But some institutions, like TreasuryDirect, require an actual person to be listed as a beneficiary. I have approached some acquaintances to ask if they would like to be my beneficiary, but as soon as I say I need their Social Security numbers, they think that I am trying to scam them. My bizarre question is: Whom can I leave my money to?

Answer: If you don’t name a beneficiary for your U.S. savings bonds, they become part of your estate when you die.

The proceeds can be distributed according to your will or living trust. This may require the court process known as probate, but whether that’s a big deal depends on where you live and the size of your probate estate. Many states have simplified probate that can make (relatively) short work of small estates.

If your savings bond holdings aren’t substantial and your other accounts have beneficiaries — which typically means they avoid probate — then this could be a reasonable approach.

Another option is to create a living trust and have the bonds reissued to the trust, said Burton Mitchell, an estate planning attorney in Los Angeles. Living trusts involve some costs to set up, but they avoid probate and they’re flexible.

“The reader can then modify the living trust whenever desired without re-titling the financial accounts,” Mitchell said.

Q&A: What is financial infidelity? And what should you do about it?

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Dear Liz: My sister is married to a man who is considerably older. They’ve been married for eight years. He has cancer and the outlook isn’t good, but he refuses to discuss their financial status. As a result, she has no idea what’s going on. How can she force him to tell her their financial situation? They aren’t getting divorced, and every article I’ve read only addresses financial disclosure in divorce cases. I will probably be the one helping her figure this out after he passes away.

Answer: Refusing to discuss the details of shared finances is at best a form of financial infidelity. A recent NerdWallet survey conducted by the Harris Poll found that many Americans aren’t sharing financial secrets with loved ones, including their income, credit card debt and how much they’ve spent on a purchase.

But at worst, it can be a sign of abuse. If he’s controlling or abusive in other ways, her physical safety may be at risk. Encourage her to call the National Domestic Violence Hotline at (800) 799-7233, which can help her assess her situation and connect her to resources that can help.

Even if she doesn’t plan to divorce, a consultation with a divorce attorney could still help. The attorney could suggest ways to piece together some of the details of their financial life and advise her about state laws regarding shared responsibility for any debts.

Q&A: Transferring bonds after a spouse dies

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Dear Liz: In 2001 I bought $50,000 worth of I Bonds. Half of them were in my name with my wife as beneficiary; the other half were in her name with me as beneficiary. She died two years ago but I do not want to cash her bonds in. How do I get them in my name without selling and repurchasing?

Answer: You can have the bonds reissued in your name alone because you were named as the beneficiary. The reissued bonds will be in electronic form, so if you haven’t already, you’ll need to create an account with TreasuryDirect, which is operated by the U.S. Department of the Treasury. If you have questions, you can reach the site’s call center at (844) 284-2676 from 8 a.m. to 5 p.m. Eastern time Monday through Friday.

Q&A: Transferring a house to heirs

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Dear Liz: We are updating our estate plan to account for the transferral of our home to our six children when we die. The home currently has a large mortgage balance on it. We would prefer that it not have to go through probate, and that any outstanding mortgage balance would not be immediately due. I know there are various options for the transferral, all with pros and cons. Do you have any recommended best practices for our situation?

Answer: Yes. Discuss the situation with an experienced estate planning attorney, who can give you personalized advice. Estate planning can get complicated fast, and expert guidance is typically worth the cost.

Your attorney probably will suggest creating a living trust to avoid probate, the court process for settling an estate. Another way to avoid probate in many states is a transfer-on-death deed. The deed can be a solution for smaller estates, but the trust allows you to transfer other assets in addition to your home, provides for the administration of your estate and helps you plan for incapacity, as well.

You probably don’t need to worry about your lender immediately calling in your loan. Your mortgage may include a clause that technically makes the full balance due if the home is sold or transferred. While the estate is being settled, though, inheritors typically are protected from these clauses by state and federal law as long as payments continue to be made. Your attorney can provide more details on the protections in your state.

With a living trust, your successor trustee will be able to access other funds in the trust to make the payments while the estate is being settled, said Jennifer Sawday, an estate planning attorney in Long Beach. With a transfer-on-death deed, the heirs would be responsible for making the payments.

Inheritors often can assume a mortgage, but having six people own one house would be unwieldy, at best. Most probably, the best solution would be to have the estate continue to make the mortgage payments until the home is sold.

Q&A: A capital gains surprise

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Dear Liz: My son has decided to settle abroad and wants to purchase a home. I made a gift of stock valued at $17,000, which had significant gains. My broker indicated that giving him the stock would avoid capital gains on my part, and he could cash the stock in at that value, also without accruing capital gains. Our CPA is now telling him that he will, indeed, have to pay the capital gains. What’s the real scoop?

Answer: It shouldn’t be a scoop that the person who does taxes for a living gave you the correct answer.

When you gave your son the stock, you also gave him your tax basis — essentially, what you paid for the stock. Once the stock was sold, your son owed taxes on those gains.

Q&A: Watch out for probate triggers

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Dear Liz: My wife and I have a living trust that includes most of our assets. We have two bank accounts that are not in the trust totaling $130,000. Will these accounts be subject to probate? If it matters, she is in memory care and I handle all finances. Our executor son is a signer on one bank account to have ready access to cover final expenses in case I predecease my wife.

Answer: As you know, living trusts are designed to avoid probate, the court process that otherwise follows death to distribute someone’s estate. In some states, including California, probate can be expensive, prolonged and often worth avoiding. Assets typically must be titled in the name of the living trust or have a designated beneficiary to avoid probate. There are some exceptions, but you’d be smart to consult an estate planning attorney to make sure you don’t inadvertently trigger the probate you’re trying to avoid.