E229 Judge Gave Her a Court-Appointed Stranger


In this episode, we bring you a real-world story of “Ms. H.,” who got a court-appointed stranger guardian instead of her family or her own attorney. This a cautionary tale for anyone who is dragging their feet on getting their planning done.

Why Ms. H. needs a guardian

Ms. H. is a Solo Ager. (For those of you who are new here, a Solo Ager is someone who is getting on in years and is unmarried or has no available immediate family to fulfill traditional roles). Ms. H. prepared her Last Will and Testament ten years ago when she in great health and named me as her executor. Her only family are nieces and nephews, whom she disinherited because they were estranged.

A will is great for after you pass away, but you still should have a plan in place for when you decline and are unable to make your own decisions. As her health slowly deteriorated, I advised Ms. H. to make a trust or power of attorney, but unfortunately, she did not.

Why Ms. H needs a guardian

Sadly, Ms. H. got to the point where she was no longer able to care for herself and was hospitalized (during COVID lockdowns) for dehydration and malnourishment. She was not eating or drinking enough.

Now that she was in “the system,” she was bounced around among social workers, rehabs, and nursing homes. No one knew where she was until she finally got in touch with me and her estranged niece. I suppose in the end, family does matter no matter what transpired in the past. We then petitioned court to be her guardians (niece as guardian of person and me as guardian of property).

Who became Guardian her person?

The guardian of person has legal authority to make healthcare decisions such as whether to stay in nursing home or try to arrange home care. In this case, moving back home was very important to Ms. H.

Who became Guardian her person

Ms. H. asked for her estranged (now reconciled) niece to serve. Unfortunately, the niece very politely declined this large task. She promised to stay in touch, but she did not want the responsibility of making major decisions and doing all the work. A nomination does not mean that someone must accept, so the judge appointed a stranger.

In this case, the stranger was an attorney chosen from a pool of attorneys who do this sort of thing for a living. The attorney had only spoken to Ms. H. once before. Would this attorney fight tooth and nail to get Ms. H. home with an aide, or would she take the easier route of leaving her in the nursing home? I know would want someone who is personally invested in my care.

Who became Guardian her property?

The guardian of property has legal authority over her funds and makes investing and spending decisions.

Who became Guardian her property

Ten years ago, Ms. H. asked for me to handle her financial affairs upon her death. So, it makes sense that she asked the court to be the guardian of her property during the final phase of her life.

Again, the judge ignored Ms. H.’s request and handed financial reins to the court appointed stranger. I am not sure why this was the Court’s decision. Sadly, a court-appointed stranger now has full legal control over Ms. H.’s personal care (instead of family) and all her money (instead of her self-selected attorney). This stranger guardian will have to do her best, based on the information she has about Ms. H., even though she did not know Ms. H. or her wishes prior to being appointed.

This is a cautionary tale that if you fail to plan properly, you will be at the mercy of the court should you ever need a guardian for health and finances. I wish we could have gotten Ms. H. the team she wanted during her final phase of life.

I hope Ms. H.’s situation helps motivate someone else to get their estate plan in order. If you want to know how to avoid a scenario like Ms. H.’s, click the link below for a free copy of my book, “The Solo Ager Estate Plan.”

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E225 3 Recent Solo Ager Estate Plan Questions

E225 3 Recent Solo Ager Estate Plan Questions


The following are three recent questions from our Solo Ager listeners. Thanks for your questions!

Is a bank as an executor better?

This question comes from a Solo Ager who listened to our previous podcast episode 221, where we discussed whether executors are contractually bound to serve.

Our listener asks, “since professional executors are not contractually bound, aren’t banks better?” The short answer is: No. Banks aren’t contractually bound, either. Individuals and banks are on the same level regarding that issue.

Is a bank as executor better?

This leads us to the next question: why wouldn’t a bank take an estate? To answer this question, you have to think far ahead 10, 15, or even 20 years.

What we have seen happen is that the bank shuts down their estate’s division. Or perhaps between the time they agreed to be your executor and the time that you pass away, the bank increases their estate minimums, so now your estate doesn’t qualify. For example, your estate may have been two million dollars when you appointed the bank, and that amount met the bank’s minimum requirements. But, since then, they bumped up their minimum to five million, which makes your estate ineligible.

Even if you meet the qualifications and the bank still has an estate department, the bank’s review committee may reject your estate. Maybe they see the estate as too risky, due to family feuds and potential litigation. Or maybe the estate has too many illiquid assets (house, art, collectibles, etc.). Banks want to be in this business to control your portfolio, and it is a lot of work to liquidate those kinds of assets.

Should a professional executor review my will before I sign?

Should a professional executor review my will before I sign?

I am often asked to be the professional executor for my clients, but I am rarely the attorney who drafts the will. This may be due to the client living in another state, they have an attorney they’re comfortable with, or that we’re not currently drafting wills.

The short answer is: No, it’s not required any more than it’s required for a spouse or best friend to review it.

However, if you name a professional executor (such as a bank or attorney), we can be a good second set of eyes to review your Last Will to make sure it’s what you want. It’s like getting a free second opinion.

But if you’re working with a good attorney, it’s not necessary to have a professional executor review the will. You also don’t want your drafting attorney to feel like he is being second-guessed. 

It could also be confusing having a lot of different people with different opinions looking at the will. You don’t want too many cooks in that kitchen.

Does naming beneficiaries on my accounts help my professional executor?

No, it probably makes things harder! Why? Naming beneficiaries to your account creates liquidity problems. It’s as if you are treating your bank or brokerage account like a life insurance policy: “In case of my death, this account will automatically go to my niece.” You might think this is great because it minimizes probate, but there are complications.
Does naming beneficiaries on my accounts help my professional executor?

Here’s the problem: if you name beneficiaries on too many (or all) of your accounts, you put your executor in a liquidity crunch. Because those beneficiary accounts go directly to the beneficiary, the executor won’t have operating cash to move the estate forward. The executor may not have enough funds to pay bills, taxes, etc.  

An example of this is one of our estates with two houses, a business, a car, and a bunch of accounts. The accounts and car had beneficiaries on them. So, now I am the executor of two houses and a business, and I have no cash. My job is to settle the estate, but I have no money to clean out the houses, secure the business property, or pay to evict the tenant that won’t leave. There are solutions, but they are not ideal. I’ll probably have to sell the business or house at a severe discount, because who is going to want to buy a house full of junk because I can’t pay to have it cleaned? Who is going to buy a business where I haven’t been able to secure it or get the financials done? No cash means selling the property “as-is,” which means fewer buyers. 

When I am named as executor, I make sure there are more than sufficient accounts in probate to cover the estate bills, or else I usually will decline to serve, as it puts me in a tough position. 

These are great, relevant questions, so please keep them coming! 

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E218 Bitcoin Letter of Instruction to Heirs

E218 Bitcoin Letter of Instruction to Heirs

Every bitcoin estate plan must include a simple, easy-to-understand letter of instruction to your heirs or executor. If you don’t, all of your hard-hoarded bitcoin may disappear.

Explain Bitcoin to a Child

Explain bitcoin to a child

Keep it super simple! Write the letter like you are explaining bitcoin to a child. Do not give the whole history of bitcoin, block chain, sound money, etc. Just write enough to get them past this treacherous stage: handling new and complex assets while grieving.

In your letter, write about:

  1. High-level concepts;
  2. Major pitfalls to avoid when working with cryptocurrency; and
  3. Immediate to-dos or checklist.

Bitcoin vs Banks

Most of your heirs understand banks and brokerage accounts. So, explain how bitcoin is different. Explain that cryptocurrency can be lost forever if handled wrong, unlike dealing with a bank. There is no password recovery.

Bitcoin vs banks

If your heir is a little more financially savvy, explain that bitcoin is like a bearer instrument. Bearer instruments are certificates where whoever holds them owns the money. (Cash is essentially a bearer instrument). When you give someone your bitcoin keys, that person has complete no-consequence access to your funds. No one will check their ID or verify their signature.

Where You Store Your Bitcoin

In your instruction letter, explain where you store your bitcoin keys. You should have a rough inventory of what you’re holding so your heirs know what to look for. Most bitcoiners have a little bit on an exchange (Coinbase, Binance, Gemini, etc.). You may also have some hot wallets online (apps, browser extensions, etc.). Lastly you may have cold wallets, which are not connected to the internet at all (hardware or paper certificate).

It is important that your instructions are in a letter, not in your will. Your holdings could change, and you won’t want to update your will for every change.

Where you store your bitcoin

Next, explain how the heirs can access the items on your inventory.

Exchanges are simple to explain, because they are more similar to banks than anything else. You heirs will send the death certificate and letters from the court and the exchange will turn over possession to the heirs.

Wallets are a little different. A good solution for a hardware wallet is to give a clone wallet to an executor or heir and give the PIN to someone else. Or you can split up a seed phrase and pass phrase among different heirs and they must collaborate to access your bitcoin.

Bitcoin letter of instruction example

If you’re reading this, I’m either dead or incapacitated. If I’m not dead or incapacitated, PLEASE STOP READING NOW.

This letter is about my Bitcoin and other cryptocurrency, and how to access them. I won’t even try to explain everything about Bitcoin here, but I want you to know enough to not get robbed or lose everything.

Some important high-level concepts:

(1) Cryptocurrencies can be lost, forever! There’s no FDIC, or bank customer support to stop payment or reverse a bad transaction. Once it’s gone, it’s gone.

(2) There’s no password reset or “recover lost password.” If you lose the passwords (known as seed phrases, I’ll explain below), Bitcoin and other cryptocurrencies are gone forever.

(3) Bitcoin and other cryptocurrencies are “bearer” assets, like cash. Whoever holds it, owns it. So if you hand someone the seed phrases, it’s like handing them an untraceable bag of cash.

Nervous enough? No worries, Just follow these instructions, and you should be fine.

On Exchanges

I hold some Bitcoin and other cryptocurrencies on the following exchanges:

– Binance.com/Coinbase.com/Gemini.com

This is the easy part: just ask my executor or probate lawyer to contact the exchange with an original death certificate and letters testamentary, and they’ll give further instructions on how to transfer my Bitcoin and other cryptocurrencies.

Now it gets harder.

On Hardware Wallets

I also hold some Bitcoin and other cryptocurrencies on hardware wallets. What’s a hardware wallet? It looks like a large USB thumb drive, and my passwords/seed phrases are securely stored inside the device. You need my PIN code to access my hardware wallet.

My hardware wallet (and duplicate copies) are located:

– Describe locations

You should automatically receive an email with the PIN within six months of my death (I set up a “Dead Man’s Switch”). Just remember: anyone who has both my hardware wallet and PIN has full, irreversible access to the Bitcoin and other cryptocurrencies inside.

Seed Phrase

If you cannot find or access any of the hardware wallets, you can still recover my Bitcoin and other cryptocurrencies using my “seed phrase.” This string of 24 ordered words is the secret password to control the funds, even without the hardware wallet device.

I’ve given the first 12 words to these trusted people: Bart, Lisa, and Maggie

And the second 12 words to: Moe, Larry, and Curly

Contact whoever you need to complete the 24 word seed phrase. And remember: whoever has the full 24 word phrase has full, irreversible access to the Bitcoin and other cryptocurrencies inside.That’s it.You probably won’t be able to navigate all this without some help.But at least you now know how to find and protect the hardware device and seed phrases while you figure out the rest.

Also, consider choosing an executor who understands bitcoin and cryptocurrency custody. You can learn more about hiring a professional executor in my book, “How to Choose Your Executor

E216 Bitcoin's Unclaimed Property Problem

E216 Bitcoin’s Unclaimed Property Problem


Bitcoin is getting more mainstream every day. But new bitcoiners need to be aware of the unclaimed funds problem. Hopefully we can contribute to a solution.

How do Unclaimed Funds Work, Generally?

The first level of prevention of loss is password recovery. This is not part of unclaimed funds, but for banks and other custodians.
If your bank account is dormant (meaning no activity for a long time), then the bank must make attempts to contact you. If there’s no contact after several attempts, then the bank sends your money to the State to hold in the unclaimed funds department. You and your heirs can recover from the State any time.
This is how banks protect their members from catastrophic loss of assets.

Why Bitcoin Is Different

Why bitcoin is different
When you own your bitcoin, you own your own keys (self-custody). If you keep your bitcoin on an exchange, there are some similarities to a regular bank account. Meaning, you have a way to recover your password and there is a similar unclaimed funds procedure as discussed above.
If you are a real bitcoin enthusiast, you probably own your bitcoin. In this case, there is no one you can call to recover your password. You are responsible for it, and there are some measures you need to take to make it work.
If your bitcoin wallet is dormant for years, no one will attempt to contact you. It just stays in zombie mode. Bitcoin is a public ledger, meaning we can all see how much is in a given wallet, we just don’t know whose wallet it is. There are wallets sitting with huge amounts and there is no one to check on them.
If you lose your keys (or fail to deliver them to your heirs), they are gone “forever”. In other words, your wallet becomes stuck with no way to get into it.

How to Prevent Lost Bitcoins

Since bitcoin is not governed by the unclaimed loss protocols, there is not a safety net.
How to prevent lost bitcoins
If you think someone knows how to manage your crypto after your death, it won’t happen without leaving instructions.
How do you recover your password? Don’t share your keys. You can split up your seed phrase or add a passphrase. You can give a copy of the hardware wallet to one person and the PIN to another person.
Another option is a decentralized dead man’s switch. A dead man’s switch is a button that needs to be pressed in order to prevent something from happening. The act of pressing the button is proof that you are alive. If you fail to press the button as scheduled, then the process starts for your funds to transfer to your beneficiary. For example, the PINs, phrases, or locations of those keys will be sent to people who will combine the information to access your account.
It’s important to remember that it is not safe to store seed phrases anywhere online (even split up).
A centralized dead man’s switch with a company could go away at any given time. A decentralized dead man’s switch would be some sort of open-source project that does not rely on one server or one company. A solution that preserves the ability to control your assets is decentralized and secure. For now, split hardware/pin or seed/passphrase are the best solutions we have.
What are some better solutions? I would love to hear from you.
What will bitcoin look like in the future? Will we have bitcoin “banks” to protect your money and provide quick easy access? How will they remain decentralized and let you keep your sovereignty over your money?

It is encouraging to see so many solo agers using cryptocurrency – even more so than their younger cohorts. If you would like a free copy of my book, “The Solo Ager Estate Plan”, click on the link below.

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E214 Transferring Bitcoin Upon Death


Let’s review a real-world case study of a client’s plan to transfer his bitcoin upon his death. This looks like an elegant solution, so let us know if you see any major red flags!

Cloned wallets and sharded seeds

The client’s plan focused on clone wallets and sharded seeds.

The plan starts with two clone hardware wallets. A hardware wallet is like a minicomputer that plugs into your USB drive, but it is not fully connected to the internet or the computer. It keeps your private keys/secret codes offline while allowing you to interact in online transactions. When you clone your hardware wallet, you make duplicates of it. Each clone wallet is password protected.

Cloned wallets and sharded seeds

The client gives one clone wallet to his executor. He gives the other clone wallet to his sister (who is an heir). Neither the executor nor the sister has the PIN to the wallet. They just have the device. They will receive the PIN upon the client’s death either by dead man’s switch or from another heir.

Then the client shards his seed phrase. Remember the seed phrase is 12 or 24 secret words that you can use to recover your cryptocurrency if something happens to your hardware wallet.

The client has divided his 12 words into two chunks of 6. The client gives half of those seed words to his executor. The executor won’t receive the second half of the words until the client dies.

Upon death, the executor will receive the PIN code to his clone wallet and then he has access to the cryptocurrency. The back-up plan is that the sister receives her PIN code from another heir or dead man’s switch. Then she has access to the cryptocurrency. In the event of hardware failure, the executor will receive the second half of the seed words to recover the hardware wallet.

Risk of theft vs catastrophic loss

Risk of theft vs catastrophic loss

Plans need to balance risk of theft vs. risk of catastrophic loss. You are twice as likely to lose your cryptocurrency than to have a hacker steal it from you. It is more complicated than memorizing a PIN code. You don’t have the safeguard of calling a bank to reset your PIN. It is also easy to over-complicate things and make it too difficult for your heirs. There might be security holes in your plan, but are they big enough to merit increasing risk of catastrophic loss?

Redundancy, and balancing risks

Using multiple hardware wallets is tangible and understandable. A hardware wallet is a device, and it needs a code to access the cryptocurrency. If hardware wallets fail, then you can always shard the seed phrase.

Redundancy, and balancing risks

By using cloned wallets, there is a slight increase for the risk of theft. In this case, the client accepted the increased risk of theft to decrease the chance of his cryptocurrency disappearing upon his death.

While this plan isn’t perfect, I like it. Please pick it apart – I want to hear your feedback. We might not be hard-core “bitcoin-ers,” but we do know what happens when people die! Being an executor is not easy. If you add cryptocurrency to the executor’s job, it’s definitely harder. It will be interesting to learn more as people die holding cryptocurrency.

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E213 What if Witnesses to Will Cannot be Found?


We’ve talked about mistakes when choosing the witnesses to your will (5 Mistakes With DIY Wills and Witnesses), but what actually happens if you can’t track down a witness during the probate process?

Witnesses to a will cannot be found

Witnesses to will cannot be found

What does it mean when the witness cannot be found? First, it could be that the witness has passed away. Second, it could mean that they left the state or the country. In todays’ age of technology, it is not that big of a deal if someone moves, but it can still lead to complications in the probate process.

Lastly, sometimes the witness simply won’t cooperate. Sometimes the witness is someone doing a good deed at the time of witnessing but doesn’t want further contact after the person is deceased. For example, maybe the attorney asked a random hospital worker to witness a patient’s will.

What to do when witnesses to will cannot be found

What does a probate attorney do when a witness to a will cannot be found? It starts with internet searches, but if no results turn up then the attorney can hire a private investigator. Private investigators have access to tools and databases that a regular person does not. They can find the witness or proof of the witness’s death. Then the attorney can prove that he or she was diligent in finding contact information or proof of death.

What to do when witnesses to will cannot be found

If an attorney was present to supervise the will signing, then ask that attorney to act as a second witness. It’s like having a backup witness in place.

Once you have the witness information, the attorney needs to check if the court will accept only one witness. Unfortunately, even after all the diligent and time-consuming work, the court may still decide that one witness is not enough.

How to avoid missing witnesses

You should always make a self-proving will. This means that the will has a separate affidavit that the witnesses sign saying that they witnessed the will. It’s an extra layer of confirmation, but it is not iron-clad. If the will is contested, then the witnesses can still be called into court.

How to avoid missing witnesses

It is a good idea to have professional witnesses to your will. This does not mean “professionals” such as nurses, doormen, bank tellers, etc. Professional witnesses could be paralegals or other attorneys who do this regularly. First of all, they know what to look for and know how to testify later as a witness to a will. Also, they are generally more available and easier to track down.

Even if your state requires two witnesses for a will, you can have more. That way, if one died away or is hard to find, then you can at least still have the required two. It’s like having a back-up to the back-up.

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E211 Use a Personal Property Memorandum to Bequeath your Stuff


Many people make this mistake with personal property when creating their estate plan: They include a long laundry list of the tiniest items in their official, legal will.

We’ll discuss why this can be a problem, and what you should do instead.

Leaving personal property in a will

Leaving personal property in a will

It is very common to leave personal property in a will. However, it can cause problems during the probate process.

Personal property lists change frequently. The items on the list may change, or you may change who you want to receive the items. You won’t want to pay money to update your will every time there is a change on the list.

Unlike a bank account, it’s hard to put a value on your personal property. Some personal property items that might make sense to put in the will are large or expensive items. Examples of these are a classic car, expensive jewelry and art, and collectibles. To determine whether the item has significant value, ask yourself: would this item be worth sending to an appraiser?

Personal property you should never put in your will

To re-cap, items that are fine to put in your will are ones with big value, worth paying for an appraisal, and things that you will likely still own when you die.

People love to put furniture in their wills, but this isn’t usually a good idea. Furniture is often in poor condition, heavy, and costly to move. It also puts pressure on the beneficiaries who may not have wanted the furniture, as most people already have complete furnished houses.

Personal property you should never put in your will

What about jewelry that is more expensive than costume jewelry, but less expensive than “estate” jewelry? It’s worth something, but not worth appraising. In this case, it’s best not to mention it in the will.

Lastly, do not put clothing in your will! Unless it is a costly mink coat, it’s not worth the headache to have your will revised every time you get rid of or buy clothing. Again, like furniture, your clothes may not be desired by your heirs.

It’s not that these items are not important, but there is a better way to leave much of your personal property to your loved ones.

Use a personal property memorandum, instead

Use a personal property memorandum, instead

A personal property memorandum is a separate document that is not part of your will. Revising your will is expensive but updating a personal property memorandum is not. The personal property memorandum is very easy to update. It could be as simple as a Word document that you update as you wish, then send the most recent copy to your attorney to keep on file. Unlike a will, the personal property memorandum is not legally binding, and that’s ok! You should choose an executor who you trust to carry out your wishes.

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E208 Article 81 Guardian vs Revocable Trust for Solo Ager

E208 Article 81 Guardian vs Revocable Trust for Solo Agers


Recently, our solo ager client, Julie, moved into a long-term rehabilitation facility. Thankfully, her health is stable, but her bills are starting to fall behind.

No plan: What is Article 81 Guardianship?

An Article 81 guardian is someone that takes over your financial affairs when you have no prior plan. By walking you through this situation, we will show you what can happen if you fail to plan.

Unfortunately, Julie only had half a plan. She has a Last Will and in it, I’m named as her executor because she has no relatives nearby. But this is only half of a plan because a will only takes effect when Julie dies. Until then, I have no legal authority.

No plan- What is article 81 guardianship?

To help Julie manage her finances and pay her bills, I have to ask the court to name me as her Article 81 guardian. Any time you have to go to court, there are usually delays, costs, and uncertainty. While we are waiting at the mercy of the court process, Julie’s co-op payments are falling behind.

Better Plan: Guardianship vs Revocable Trust

What would have been a better, complete plan for Julie? In this case, with a revocable trust, I could step in and help Julie without the long court process. Besides avoiding probate, another benefit of a revocable trust is the end-of-life help with finances. For the same reasons you’d  avoid probate, you’d want your end-of-life team to be able to help you without going to court.

Better plan- guardianship vs revocable trust

If you worry that it’s too expensive to hire a lawyer for a trust, note that the cost of an Article 81 guardianship is between $5,000 to $10,000. A revocable trust costs about $2,000. I don’t recommend revocable trusts for everyone, but it is often a wise option for solo agers.

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E204 How to Make Sure You Don’t Leave Anything to ...

E204 How to Make Sure You Don’t Leave Anything to …


Many of our Solo Ager clients want to make sure they don’t leave anything to a relative who is distant, estranged, or they just dislike. Here are a couple of common misconceptions – and the best solution.

Can’t I just omit them from the Will?

Can’t I just omit them from the will?

The assumption is, “If I omit them from my Will, they have zero involvement, right?”

Unfortunately, that is not how the process works. They will still receive notice from the court regarding the Will. When you probate a will in court, you’re required to notify all the family members who would have inherited under the default inheritance law (what the inheritance plan would have been if there was no Will).

For example, you are unmarried with no children, and you have several nieces and nephews who are not involved in your life. Those nieces and nephews are the ones who would inherit if you didn’t have a Will, and they will receive a court notice even if you omit them from your Will.

That court notice is basically an invitation to come to court and contest the Will. Those nieces and nephews may not have legitimate grounds to contest, but may drain the estate’s funds fighting the legal battle, stress out your intended heirs, etc.

Can’t I specifically disinherit them in my Will?

Can’t I specifically disinherit them in my will?

Yes, this is called an “In terrorem” clause, but there are two problems with this approach:

  1. You’re still notifying them and inviting them to contest your Will; and
  2. In terrorem works best with an “incentive,” which you probably don’t want to give.

For example, an In terrorem clause could state that if a nephew contests the Will, then he might not receive anything. The problem here is that you didn’t want him to receive anything anyway. Now, he has no disincentive to contest the Will.

The In terrorem clause works best by giving the nephew something as a disincentive for him to challenge the Will: “I leave $10,000 to my nephew, but if he contests the Will, he will not be entitled to receive the $10,000.” In this example, you have given your nephew a disincentive to challenge, but you’ve also given him money as advanced blackmail that you would not have given to him in the first place.

Solution: A Trust

Solution- a Trust

In the situation where you want to make sure a specific person does not get anything and cannot challenge your wishes – a Trust works best.

A Trust is a mechanism used to deliver assets to your heirs without the probate court process. If you don’t have the probate court process, then no notice is sent to heirs who are not named in the Trust. Even if an unnamed relative finds out about the Trust, there is no easy mechanism to contest your wishes. Unlike the In terrorem clause in the Will, there is no need to give an “incentive” in the Trust.

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E201 Should I Name a Trust as Beneficiary of My Accounts

E201 Should I Name a Trust as Beneficiary of My Accounts?


Another question that we receive often is “should I name a trust as beneficiary of my estate?” In a recent case, Rhonda reached out to us, because she wanted the benefits of a trust (avoid probate, reduce chance of a “will contest,” etc.), but she was not quite ready for the headache of a full-blown trust setup. In her particular situation, naming her trust as beneficiary makes sense. If you are considering this doing this, here are a few things you should consider.

How to Name Trust as Beneficiary

How to Name Trust as Beneficiary

A full-blown trust has to be set up and funded. It can be a nominal amount, even as little as $10. It has to own things and you will need to convert your banking accounts, houses, and related items from your individual name to the trust name. It may be quite a bit of work in some situations. For example. if you live in a co-op, this can be a lot of work to change your deed. You will likely need board approval, and this will take time and work. If changing your banking, you will need to go to the bank and open new accounts in the trust name. You’ll then need to change any direct deposits and withdraws once the new account is open.

In Rhonda’s case, instead of changing all of her accounts now, she is leaving them in her name and changing the beneficiary of the accounts to a trust. For example, when you have life insurance, you can name a person or multiple people as beneficiaries. However, instead of naming a person, you can name your trust to be the recipient.

In her situation, her trust will be unfunded until she passes. Upon her passing, the trust will be funded using the beneficiary designations.

To name a trust as a beneficiary, there are three basic steps. You must create the trust document, you then fund the trust (even a nominal $10), and finally, you name a beneficiary. Usually, you can obtain change of beneficiary forms for your accounts to change the names. The result: you have a hollow, but ready, trust on standby, which is ready to accept funds as beneficiary upon your passing.

Pros of Your Trust as Beneficiary

Pros of Your Trust as Beneficiary

One of the pros for taking this route is that, in theory, you get to avoid the costs and headache of probate. Probate is generally not easy and takes a long time. If there is a beneficiary on an account, then the account does not need to go through probate to be liquidated. You simply need a death certificate and a copy of the trust to withdraw the funds. Having a trust also reduces the chance of a will contest. If there is a wayward heir, they can contest the will if it is probated. If you do not probate, it’s much harder. You essentially create a challenge barrier with a trust.

There is also a phycological connection. Changing all of your accounts out of your name and into a trust name may feel as if it’s not yours. If that is an issue for you, then this option may be a good way around that feeling.

Cons of Your Trust as Beneficiary

This way of doing a trust does not protect you from court-appointed strangers (known as guardians) controlling your funds during your life. If everything is still in your name and you become incapacitated or someone can assert that you are in cognitive decline, then a guardian can be appointed to control your funds. However, if everything is owned by the trust, then a court-appointed guardian can not access those items. Only the trustee of the trust, as chosen by you, can control what happens. Not only does a full trust prevent a court-appointed stranger from controlling your assets, but they most likely won’t bother with you, because there are no funds for them to control.

Cons of Your Trust as Beneficiary

In general, Anthony is not really a fan of naming a trust as a beneficiary, because in his experience, people generally do not do a good job tracking their beneficiary designations. We see very often where people forget to change their beneficiaries after relationship ends and people die. It is very easy to forget, even if you are really well organized. The designations are not conspicuous and are not usually listed on the statements, so people do forget. Bottom line – people do not remember.

Another reason that Anthony doesn’t suggest this route is that honestly, doing it this way does not really save as much time as you would think. It is actually very similar to what you will need to do with your assets when you create a full-blown trust. In either scenario, you will have to submit forms and provide documentation, which is almost the same process in both situations.

Naming a trust as your beneficiary is a good steppingstone as first step to a fully funded trust. We suggest you talk out your wishes and situation with an experienced estate planner to determine the best route for you.

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