If there is anything that can make you long for the days when social media influencers were hawking weight loss tea and galaxy lamps it should be the rise of self-proclaimed financial gurus who are ready to help make you a zillionaire.
It’s sketchy as all get out. And to make matters worse, they have started offering estate planning tips as well. There are now a number of people who believe monkeying with the beneficiary designations on their bank accounts will somehow help them cheat the system and pass wealth to their kids tax-free.
In this blog post, the Palmer & Slay team will bust this myth and provide some perspective on what adding a POD or creating a joint account actually does.
Dying Without a Will in Mississippi
First things first, let’s talk about what happens when you die without a formal estate plan in place aka intestate. This means you have not worked with an attorney to draft a will, health care directive, power of attorney, or any other estate planning document.
If you don’t take the time to create these essential documents you are telling the state of Mississippi you are okay with the government deciding who inherits your assets after you die.
“Hacking” the Estate Planning Process with Beneficiary Designations
Finfluencers are claiming you can “hack” Mississippi’s system for probating the assets of people who die intestate by setting up joint accounts with people you want to inherit from you or adding POD (payable on death) beneficiaries to all of your accounts. But this is only partially true.
However, you can avoid taking certain assets through the probate system by adding beneficiary designations or holding an account jointly. But anyone who does this must be aware that those actions are not something you should take lightly.
Adding a POD Means That Person Gets Everything
Banks almost always require account holders to list someone the account should be turned over to if the creator passes away. These POD (payable on death) terms help the bank avoid a big headache when an account holder dies.
Adding a POD to an account means that account will belong to that person after you are gone. They will have no responsibility to share the assets held in it with others. And if they do share the assets with others there may be tax implications.
Setting Up a Joint Account Gives Others Control of Your Assets
Joint accounts are banking or investment accounts that two or more own together. The boilerplate language that banks include on the forms people fill out to start up these accounts typically indicate that the account owners all have equal rights to the assets in the account, and the right of survivorship.
Having equal control of the account is the benefit most people are seeking when they set up these accounts. Joint accounts are a great way to ensure that spouses can pay their household bills by pooling their resources. These accounts are also a great tool for people who are assisting an older relative with their financial affairs.
The right of survivorship is a less well-known, and often misunderstood, characteristic of most joint accounts. Opening a joint account with a right of survivorship means the account holder that lives the longest ends up with complete ownership of the account.
The person who lives longest will have no responsibility to share the assets they now solely own with anyone else. And, like with a POD, there may be taxes due if they do decide to share the money with someone else.
Preserving Your Wealth. Protecting Your Loved Ones.
Contrary to what you may have seen online, you cannot skip probate or avoid all estate taxes by filling out a few forms at your bank. The best way to “hack” your estate plan is still working with an experienced attorney like those at Palmer & Slay PLLC. Our team is ready to help make the estate planning process as simple as possible. Please contact us today to set up a meeting.