transfer on death deeds

Q&A: “Simple” ways to avoid probate often create complications

August 5, 2025 By Liz Weston Leave a Comment

Dear Liz: I was perplexed by your column in which you pooh-poohed pay-on-death and transfer-on-death accounts in favor of trusts. But you gave no specific explanation. Rather, you said trusts “generally allow a smoother, more organized settlement of the estate than other probate-avoidance options.” Would you please explain what is smoother and more organized than POD and TOD transfers? (Beneficiary deeds fall into the same category as POD and TOD, to my way of thinking.) These transfers simply involve a copy of the death certificate and some minimal paperwork. What could be simpler?

Answer: The fact that you asked this question suggests you may not be familiar with the many ways these transfers can cause unintended problems. An estate planning attorney could fill you in.

One issue covered previously in this column is the fact that the person settling the estate typically needs money to pay final bills. If all the funds in the estate have been transferred to beneficiaries, the executor would have to beg for money to be returned (with no guarantee beneficiaries will cooperate) or pay the expenses out of their own pocket.

Another obvious issue is unequal distribution if you have more than one heir. Account values can change over time, leading to sometimes dramatic differences in what the beneficiaries receive.

Speaking of change, it’s the one constant in life. A living trust allows you to easily update your estate plan in one centralized place as circumstances change. Altering beneficiary designations can take a lot more work, and it’s easy to miss an account if you have several.

Beneficiary designations offer limited contingency planning. If the beneficiaries die before you or otherwise can’t inherit, the account could come back into your estate and be subject to probate. Also, many people forget to update their beneficiaries after major life changes, which can mean the wrong people inherit. More than one ex-spouse has received retirement funds or life insurance proceeds because the beneficiary form wasn’t updated.

Another unfortunately common occurrence is an inheritance that disqualifies a disabled beneficiary from receiving government benefits. You also can’t control how money is spent with a beneficiary designation, which can be a problem if the beneficiary is a minor, an addict or a spendthrift.

Plus, people get sued. Beneficiary designations offer no protection against creditors, while a properly written trust can help protect your assets and your heirs’ inheritance.

This is by no means an exhaustive list of the potential issues with beneficiary designations. They can be a solution for people with limited funds who can’t afford to pay an estate planning attorney, or when they’re part of a coordinated estate plan. Many people set up a trust for real estate and financial accounts, for example, and use beneficiaries for retirement accounts, notes Jennifer Sawday, an estate planning attorney in Long Beach.

The more money you have and the more complex your situation, the more you — and your heirs — would benefit from expert, individualized advice.

Q&A: Why living trusts are a good option, most of the time

July 7, 2025 By Liz Weston

Dear Liz: My goal is to avoid probate and allow simplified access for my heir, who is also my executor. I have no family. I have chosen payable-on-death and transfer-on-death accounts instead of putting all financial assets in my trust, against the wishes of the attorney who drew up the trust for my condo. I am 79, with about a million in financial assets, with no debt or mortgage, and I am self-insured for long-term healthcare. Is the decision to use these accounts appropriate for me?

Answer: Please take the advice you paid for. The trust you have is probably a living trust, a flexible estate-planning device that avoids probate. Living trusts generally allow a smoother, more organized settlement of the estate than other probate-avoidance options.

The person who settles your estate is called your successor trustee and will perform much the same duties as an executor. But typically your successor trustee also can handle financial and other matters should you become incapacitated.

As covered in previous columns, payable-on-death and transfer-on-death accounts can be appropriate solutions for people with few assets who can’t afford to pay for a living trust. For more complex estates like yours, however, a living trust is the more appropriate option.

Q&A: Credit card debt doesn’t disappear when you die

April 14, 2025 By Liz Weston

Dear Liz: I am an 80-year-old female in generally good health. My only family is my unmarried 54-year-old son. The only debt I have is credit card debt of about $30,000 at 0% interest. It’s in my name alone. My house and car have been registered with “transfer on death” designations. My son’s name is on my modest checking account. When I die, is there a legal situation where he would be required to pay the credit card debt? There will be no probate.

Answer: Credit card debt doesn’t just disappear when you die. The debt would become the responsibility of your estate. Transfer-on-death options avoid probate, the court process that otherwise follows death, but creditors can still go after the property that’s been transferred.

Depending on state law, creditors may have longer to make their claims than if your estate had gone through probate or if you had used a living trust, says Jennifer Sawday, an estate planning attorney in Long Beach.

That’s among the reasons why transfer-on-death designations may not be the best solution. Consider making an appointment with an estate planning attorney to discuss your situation and possible alternatives.

Also, your 0% interest rate is temporary. Once the current teaser rate ends, you’ll likely pay a much higher interest rate and your monthly payments could jump. If you can pay off this debt, that’s probably the best course. If you can’t, you may want to discuss your situation with a bankruptcy attorney.

Q&A: The ins and outs of what counts for probate

April 1, 2024 By Liz Weston

Dear Liz: The value of our car, furniture and personal items is well below the $185,000 that currently triggers probate in California. We no longer own real estate. Am I correct that investment and bank accounts that have designated beneficiaries do not count toward the probate limit?

Answer: Yes. (Your car doesn’t count either, by the way.)

Most states have simplified procedures for smaller estates. California’s limit, which is raised with inflation every three years, was set at $184,500 on April 1, 2022. What’s counted for probate purposes depends on state law, and California excludes cars, boats and mobile homes, as well as bank accounts owned by multiple people, property that transfers directly to a spouse and real estate outside California.

Other property that avoids probate includes life insurance proceeds, death benefits and accounts that have named beneficiaries. Real estate can avoid probate if it’s held in joint tenancy or is transferred using a transfer-on-death deed. Property in a living trust also avoids probate.