Payable on Death Accounts

[Abita2000]

What is the name of your state? Louisiana

A payable on death account bypasses probate, but is that account included as part of the estate for tax purposes?

 

[seniorjudge]

Q: A payable on death account bypasses probate, but is that account included as part of the estate for tax purposes?

A: Are you talking about Federal or State taxes? (The general answer to your question is no.)

 

[Abita2000]

So by adding POD to your Bank accounts would reduce the amount of your estate to be taxes for federal and state? Could you also add POD to property titles?

 

[seniorjudge]

So by adding POD to your Bank accounts would reduce the amount of your estate to be taxes for federal and state? Could you also add POD to property titles?

This is possible. Obviously, you need to see a real estate attorney and a tax CPA to get the exact answers...especially in Louisiana....

 

[tranquility]

Totten trust amounts are included in the calculation of estate taxes. They are not probated in most states.

 

[seniorjudge]

Totten trust amounts are included in the calculation of estate taxes. They are not probated in most states.

POD accounts are not classified as Totten trusts, are they?

(New one on me if they are....)

 

[anteater]

POD accounts are not classified as Totten trusts, are they?

(New one on me if they are....)

POD or Totten does not really matter. The decedent would still have been the owner and had full control of the account. It would be considered part of the gross taxable estate. I don't know of any states that would exclude it from state estate/inheritance tax.

As I recall, there are now eight or nine states that allow beneficiary deeds for real property. Can't lay my hands on the list, but I don't think that Louisiana is one of them.

 

[Zigner]

POD accounts are not classified as Totten trusts, are they?

(New one on me if they are....)

Google "Totten Trust" - it IS a POD

 

[seniorjudge]

Definitions of totten trust on the Web:

* Trust created by the deposit of one person’s money in his own name as trustee for another. The asset belongs to the depositor, who during his life holds it on a revocable basis for the named beneficiary. At the death of the depositor a presumption arises that an absolute trust was created as to the balance on hand at the death of the depositor, which now belongs to the named beneficiary. Also called “Pay On Death” account or “In Trust For” account.
www.rclaw.com/glossary.htm

* savings account trust: a savings account deposited by someone who makes themselves the trustee for a beneficiary and who controls it during their lifetime; afterward the balance is payable to the previously named beneficiary
wordnet.princeton.edu/perl/webwn


A trust has a trustee. A plain old POD account is not a trust because there is no trustee.

 

[seniorjudge]

Yes, I know Wikipedia is a shaky authority on its very best day, but here's an example of the distinction I made:


Totten trust
From Wikipedia, the free encyclopedia
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A Totten trust (also referred to as a "Payable on Death" account) is a form of trust created where one party (the settlor of the trust) places money in a bank account or security with instructions that upon the settlor's death, whatever is in that account will pass to a named beneficiary. For example, a Totten trust arises where the account is titled in the form "[depositor], in trust for [beneficiary]". It is not a legal trust, but arises out of equity, as a matter of fairness.

The name is derived from Matter of Totten, 179 N.Y. 112 (1904), the case decided by the Court of Appeals of New York which established the legality of this practice. Although this method of creating a trust did not meet the formal requirements of trust creation, or the testamentary formalities required to make a valid will, the Court noted that such an arrangement typically involved a small amount of money left by a person of modest means, who could not otherwise afford to establish a legal mechanism for passing the specified property. For this reason, the device is sometimes called a "poor man's will". The funds in question are not subject to probate and, if held in a bank account, are insured in the same manner as any deposit. The beneficiary has no access to the account until the depositor's death and need not be notified that the account exists.

Most U.S. States now recognize the validity of Totten trusts. The Restatement 3d of Trusts Section 26 and the Restatement 3d of Property Section 7.1 comment i also recognize its validity. Such a device can be revoked at any time by the settlor, either by closing the account or by executing a will which disposes of the property in the account. The funds in the account can be reached by the creditors of the settlor during the settlor's life. If the intended beneficiary predeceases the settlor, then the gift will lapse, and will generally not be saved by an anti-lapse statute.

Totten trusts can only be created with certain types of depository accounts or securities; in particular they cannot be used to convey real property.

http://en.wikipedia.org/wiki/Totten_trust

 

[tranquility]

"A deposit by one person of his own money, in his own name as trustee for another, standing alone, does not establish an irrevocable trust during the lifetime of the depositer. It is a tentative trust merely, revocable at will, until the depositor dies or completes the gift in his lifetime by some unequivocal act or declaration, such as delivery of the pass book or notic to the beneficiary. In case the depositor dies before the beneficiary without revocation, or some decisive act or declaration of disaffirmance, the presumption arises that an absolute trust was created as to the balance on hand at the death of the depositor." In re Totten, 179 N.Y. 112, 125-26 (1904) (per Black's Law dictionary)

Now, what is the difference between the above discription and a POD account?

 

[seniorjudge]

John Doe, payable on death to Frank Roe

John Doe, as trustee for Frank Roe, payable on death




The differences are obvious.

 

[Zigner]

John Doe, payable on death to Frank Roe

John Doe, as trustee for Frank Roe, payable on death




The differences are obvious.

SJ - you're slipping on this one

 

[seniorjudge]

John Doe, payable on death to Frank Roe

John Doe, as trustee for Frank Roe, payable on death




The differences are obvious.

Someone tell me the differences OR why there are no differences.

 

[Zigner]

Someone tell me the differences OR why there are no differences.

Generally, it's just a "choice of words". A POD account is called a Totten Trust. It may not, in fact, be a "trust" in the same sense of the word.