Handling Savings Bonds In Your Estate Plan

How you own your savings bonds can affect how they are transferred to your beneficiaries.
How you own your savings bonds can affect how they are transferred to your beneficiaries.

There are several estate planning issues you should keep in mind if you have savings bonds or plan to invest in them.

There are currently two types of savings bonds: Series EE U.S. Savings Bonds are currently sold at face value and worth their full value upon redemption with interest. Series I U.S. Savings Bonds are inflation-indexed, i.e., they offer a fixed rate of interest that is adjusted for inflation and are often used as a long-term investment.

Will Savings Bonds Avoid Probate?

Probate is the court process for ensuring that a deceased person’s assets are transferred to the correct beneficiaries. People often seek to avoid probate, as it can be a time consuming and expensive. Whether a savings bond will have to go through the probate process depends on how the savings bond is titled; in other words – how it is owned.

Single owner. It is very common for an individual to purchase a savings bond titled in his or her own name. However, if you choose to do this, your estate will go through the probate process, even if you have a will specifying who you would like to inherit it. If you do not have a will, the savings bond will be passed on to your heirs as determined by a court under Texas law.

Name a co-owner. Two or more people can hold title to a savings bond as co-owners. Each of the co-owners is allowed to cash the bond, even without the knowledge or permission of the other owners. Savings bonds titled in this way pass directly to the surviving co-owner(s) without probate. However, when the last owner dies, the savings bonds are part of the last surviving person’s estate, which must be probated in the absence of additional estate planning designed to avoid it.

Name a beneficiary. Another option is to name a beneficiary with the U.S. Treasury Department using the TreasuryDirect website. If you do this, the savings bond will not need to go through probate, because the beneficiary you have named will automatically become the owner upon your death. The beneficiary must also set up a TreasuryDirect account, but once it is established, will only need to deal with a straightforward process to transfer ownership of the bond when you pass away. This beneficiary designation will take precedence over a contrary provision in your will.

Create a trust. If you want to continue to benefit from the savings bond individually, without naming a beneficiary with the Treasury Department, but also want to avoid probate, you can create a trust and transfer title of the savings bond to the trust. Beneficiaries you name in the trust can receive the benefit of the savings bond, and you can name someone you trust as the trustee to manage the savings bonds. When savings bonds are held by a trust, you can protect beneficiaries who tend to be financially irresponsible from themselves by preventing them from cashing and spending the bonds until the terms of the trust allow them to be distributed to the beneficiaries. In addition, certain types of trusts can protect the savings bonds from being reached by your beneficiaries’ creditors.

If you own savings bonds or are considering investing in them as part of your financial plan, an experienced estate planning attorney can help you consider the pros and cons, as well as the best ways to title them in order to achieve your estate planning goals.

The one mistake you want to avoid is not coordinating your savings bonds with your overall estate plan.

You may also be interested in https://galligan-law.com/common-mistakes-made-on-beneficiary-designations/.

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Things You Should Not Keep in Your Safe Deposit Box

A safe deposit box may not be the best place to keep some items.
A safe deposit box may not be the best place to keep some items.

A safe deposit box isn’t a smart choice for everything. Kiplinger’s recent article entitled “9 Things You’ll Regret Keeping in a Safe Deposit Box” advises that there are some items you might not want to lock away in your bank, which isn’t open nights, holidays, or weekends. During this pandemic, hours of operation for many businesses are reduced. Some financial institutions have temporarily closed some locations. There are other banks that require an appointment for in-branch services, like accessing your safe deposit box. This could create a headache if you’re trying to retrieve important documents or items when you need them.

Here are some items you should store elsewhere, because may need to access them more often or on short notice.

Cash. Keeping a large amount of cash in a safe deposit box isn’t a good idea. If you need it at a time when the bank is closed, you’re out of luck. In addition, the cash may lose its buying power over time because of inflation. You may also find that some banks don’t allow cash in a safe deposit box. Finally, cash in a safe deposit box isn’t protected by the FDIC. To have FDIC insurance (covering up to $250,000 per depositor per insured bank), your cash needs to be deposited in a qualifying deposit account, such as a checking account, savings account, or CD.

Your Passport.  If you need to take an emergency trip, you would not be able to pick up your passport during non-banking hours. If your travel requires a passport, there’s not much you can do about those calls in the middle of the night requiring you to travel immediately.

The Original of Your Will. It may not be a good idea to keep your original will in a safe deposit box because after your death, the bank may require the executor named in your will to obtain a court order to access the safe deposit box. That could mean a long and expensive delay before your will is probated and your estate is settled.

Funeral and Burial Instructions. Many people execute a legal document regarding the disposition of their remains or write a letter of instruction with funeral arrangements to accompany their will. The problem is that, if these instructions are hidden away in your safe deposit box, they may not be read in time to have any effect.

Uninsured Jewelry and Collectibles. Heirloom jewelry and your valuable stamp collection and rare coins are good candidates for a safe deposit box, but they must be properly insured. The FDIC doesn’t insure safe deposit box contents, and neither does the bank, unless it’s stated in your agreement.

Any Illegal or Dangerous Items. Your bank should provide you with a list of items that are not permissible to keep in a safe deposit box. This will include things like firearms, illegal drugs and hazardous materials.

You may also be interested in https://galligan-law.com/does-your-estate-planning-include-your-online-account-passwords/.

Reference: Kiplinger (June 1, 2020) “9 Things You’ll Regret Keeping in a Safe Deposit Box”

 

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Will Contests – Does a “No-Contest” Clause Really Work?

A no-contest clause in your will may discourage a will contest.
A no-contest clause in your will may discourage a will contest.

We live in a litigious society. Unfortunately, even family members sometimes file lawsuits because they are dissatisfied with what their parents or loved ones leave them in a will or trust. Some are so disgruntled that they decide to contest or challenge the validity of a will or trust, which can delay its administration for years and result in thousands of dollars in legal fees. If you are concerned that any of your beneficiaries may seek to challenge your will or trust, a no-contest clause might be one method you can use to discourage them from pursuing this course of action.

What Is a No-Contest Clause?

A typical no-contest clause provides that a beneficiary who disputes the validity of a will forfeits any inheritance or benefit they otherwise would have received according to its terms. It will not prevent someone who is not a beneficiary named in your will or trust from contesting it though.

Are They Enforceable?

In Texas, no-contest clauses are enforceable unless the will contestant shows that he or she had “just cause” for contesting the will and that the will contest is in good faith. The goal is to discourage will contests that are not brought in good faith (for example, a person might threaten a will contest in the hopes that the rightful beneficiaries would be willing to settle for an amount less than the cost of defending the will contest),  but to allow contests for legitimate reasons, such as a forgery, or when a purported will is executed by an incapacitated person or a person who has been unduly influenced by another.

What Are the Pros and Cons?

These types of clauses have some advantages as well as some disadvantages, as listed below:

Pros of a no-contest clause

  • Honors your right to give your property to the parties you have chosen in the way you want, as expressed in your will or trust
  • Discourages baseless challenges to a will or trust by a disgruntled beneficiary
  • Discourages meritless lawsuits aimed at forcing a settlement by a dissatisfied beneficiary
  • Avoids lengthy and expensive litigation that will deplete your estate and delay administration

Cons of no-contest clause

  • Causes a beneficiary to suffer a forfeiture of his or her inheritance for enforcing his or her right to challenge the will’s validity
  • Impedes the court’s ability to determine if the will or trust is valid and ensure that it was not executed as a result of unlawful means, for example, where an unscrupulous child convinces an elderly parent with dementia to sign a new will beneficial to that child shortly before the parent’s death

Create an Estate Plan That Keeps the Peace

If you see trouble brewing and are concerned that family members could contest your will or trust, a no-contest clause is one tool that could discourage dissatisfied beneficiaries from seeking to have it declared invalid. Another possibility that could forestall a will or trust contest is to conduct a family meeting during which you can explain your reasons for distributing your money and property in the way you have. An experienced estate planning attorney can help you create an estate plan for your unique circumstances and to employ all available tools, including a no-contest clause, to decrease possible conflict within the family

You may also be interested in https://galligan-law.com/does-your-executor-know-what-to-do/.

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