It is easier than ever to avoid probate by using transfer-on-death (TOD) and pay-on-death (POD) designations on assets, such as the family business, real estate, bank accounts, and investment accounts. However, a TOD or POD beneficiary will not have access to the assets during the owner's lifetime. Therefore, it may be important to give another person access to investments and bank accounts in case the owner becomes unable to manage their property and bills.
A durable power of attorney is a document that a person (referred to as the 'Principal') uses to authorize another person (referred to as the 'Agent' or 'Attorney-in-fact') to manage the Principal's property. However, many financial institutions are hesitant to accept a durable power of attorney, especially for an extended period of time.
One way to ensure that the Agent can access the Principal's bank accounts and investments is to place them in a revocable trust. This allows the Agent to resign as trustee on behalf of the Principal if the Principal becomes disabled and take over as the successor trustee to manage the property. In this way, a revocable trust is important for incapacity planning.
Unfortunately, transfer-on-death (TOD) and pay-on-death (POD) designations cannot be placed on assets held in a revocable trust. Even though a living trust is used to transfer assets to beneficiaries upon death, administering the trust is a process that delays the distribution of assets and requires notifying all legal heirs of their right to obtain a copy of the trust. TOD and POD designations are beneficial because they don't have the same delays and disclosure requirements.
It is advisable to consult with an experienced estate planning attorney who can create a customized estate and incapacity plan that incorporates the appropriate techniques based on your specific circumstances and concerns. Contact Broaden Law LLP at (619) 833-8985 today to schedule your estate plan consultation with one of our experienced attorneys.