Estate Planning Lite

Estate Planning

Estate Planning Lite

Informal trusts make it simple to divvy up your assets.

It's like doing your taxes with a Form 1040EZ. You decide who should inherit your financial assets. Then you contact your bank, brokerage or mutual fund company and request a form. Fill in your name, address, social security number and the beneficiary's information. Sign the form. That's it. You're done.

Payable on Death (POD) and Transfer on Death (TOD) registration forms are actually informal revocable trusts that allow you to designate who will receive your accounts after you die. Until then, you have complete control and can deposit or withdraw money or change beneficiaries.

Banks offer POD registration for certificates of deposit and for checking and savings accounts. Registration comes with a bonus: additional FDIC insurance for qualifying beneficiaries, who may include your spouse, siblings, children, grandchildren and parents. Transfer on Death forms are used to register stocks, bonds, mutual funds and brokerage accounts, and they are legal in every state except Louisiana and Texas.

These accounts work best if you name a single beneficiary for each account. Assets avoid probate and pass directly to the individual named. Although your creditors generally don't have access to the funds, the money is included when your executor calculates whether estate taxes are due. If your estate is large enough to owe taxes (estates up to $2 million are exempt from federal taxes this year), your beneficiaries may have to pay Uncle Sam.


A POD designation trumps your will, warns Marsha Murray-Lusby, a Portland, Ore., lawyer who specializes in estate planning. For instance, if your will stipulates that your children should share equally and the POD accounts they inherit are unequal, there's no guarantee that they'll agree to transfer money to one another to equalize the bequests. And even if they are willing to exchange funds, doing so could trigger gift taxes this year if the amount is more than $12,000. Says Kathleen Nagle of the FDIC, "Make sure this is what you really want to do."

-- Joan Goldwasser