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How Does P.O.D. (Payable on Death) Bank Account Work in Community Property State Like Wisconsin?

Attorney Thomas B. Burton answers the question: "How Does P.O.D. (Payable on Death) Bank Account Work in Community Property State Like Wisconsin??" in this latest episode of the popular question and answer series. In this video, Attorney Burton discusses the ways a Payable on Death Bank Account work in a community property state like Wisconsin.

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I'm Attorney Thomas Burton, I'm an estate planning and asset protection attorney here in Wisconsin and today, we return to our popular question and answer series.

Today's question comes from Racine, Wisconsin and the writer asks the following -

"How does a payable on death bank account work in a community property state such as Wisconsin? My husband and I are running into confusion when naming beneficiaries on our payable on death bank accounts in Wisconsin. Since it is a community property state would we need to name one of us, the spouse, on a joint bank account as a primary beneficiary? Ideally, we'd like to name our two daughters to have the proceeds split equally in order to avoid probate. If one of us were to pass away before the other, would half of the bank accounts contents automatically go to the spouse regardless of named beneficiaries? Thank you for your time."

Thank you for your question, this is an excellent question and you're on the right track here with the payable on death bank accounts, if you want to use them as a probate avoidance device but it's important to understand exactly how they work.

So you're right that Wisconsin is a community property state like several other states such as California. In Wisconsin, we call it marital property. If both your names are listed on the account as co-owners, joint owners, then if one dies, the remaining owner owns the entire account, okay? So the beneficiary, the payable on death beneficiary, only would kick in upon the second spouse's death, if you're joint owners on the account. So you could name both children as beneficiaries on the account with a 50-50 distribution and that would split the account equally between them.

However this will not work for any real estate you own in Wisconsin and other assets, it only works for the assets in that bank account and the limit on probate in Wisconsin, the amount of assets that trigger probate is $50,000 or more. So if you have any real estate over that limit, you're going to want to look at other probate avoidance techniques to completely avoid probate on your entire estate. This is why I often recommend a revocable living trust as a complete plan to avoid probate for all of people's assets including tangible personal property, real estate bankers accounts etc.

Now, so what you're contemplating will work, the payable on death, to the daughters but just be aware, it only kicks in upon the second spouse's death. The money will then pass by the contract between you and the bank to the payable on death beneficiary. So I would sit down in your situation, work with a qualified estate planning attorney. They could help you design a holistic plan to avoid probate on all of your accounts including real estate financial assets and personal property.

The one thing I see that people run into trouble with these payable on bank, on death bank accounts is sometimes they put the payable on debt beneficiary on there and then they never look at it again and they may change banks or move money around and if it says here I think you say you have two daughters, so that's helpful, there's just two, if you name them 50% on every account, that can help avoid running into problems but sometimes people will name one person on one account and one person is payable on death on another and then for instance, they move funds around between the account and it doesn't end up being an equal distribution but when they set up the payable on death, it was going to be roughly equal distribution but you have to really watch these account balances and think about where you're keeping the money which can be a lot of maintenance to do, on an ongoing basis. That's why I often prefer trust planning where the trust says, split everything 50-50 between my daughters and then we can name the trust as the payable on death beneficiary of all the financial accounts or better yet, re-title the accounts into the trust. Then you have incapacity protection if something happens to you or your husband where you're unable to manage the assets. The successor trustee can immediately step into your shoes, take over managing the assets until you regain capacity and ultimately, you know that in your trust document, you've laid out, you want 50-50 split of everything between your two daughters and finally, when everything's properly titled in the trust, you can avoid probate completely meaning no need to open a probate for real estate or other assets you may own.

So this is an excellent question. I want to thank you for asking it because it's illustrative for other people watching, thinking about these payable on death accounts. If this has been helpful to you, please consider giving it a like, so that more people can see and benefit from this information as well.

Thanks for watching and we'll see you next time.

© 2021 Burton Law LLC. All Rights Reserved. Transcript and captions provided for ease of access for the hearing impaired. For questions about this topic, or to suggest a topic for a future blog post, please contact the office.


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