Non-Probate Transfers in California Estate Planning – The Law Offices of Andy I. Chen
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Non-Probate Transfers in California Estate Planning – The Law Offices of Andy I. Chen

Hi everybody! It’s Andy and welcome again to my office in Modesto, California. I’m an attorney licensed to practice law in
California as well as New York. In this video, I’m going to go over a California
estate law planning technique called a Non-Probate Transfer. Specifically, I’m going to talk about a non-probate transfer called a Pay-On-Death designation. Those
of you who have looked into this before or, you know if you look into it now
after seeing this video, you might see the term Totten Trust. Totten is T-O-T-T-E-N. So that’s the same thing as a Pay-On- Death designation. Years and years ago
there was a case in New York state, actually, involving a decedent named
Totten and that was the first case that basically came up with this idea of a
Totten trust. So if, you know, for better or worse, I guess, his name was forever
attached to the concept. So, but anyway, regardless of, you know, what term you
used to call it, a Totten trust normally is going to be used in a situation like
this. So let’s say that we have, you know, grandma and grandma is say 90 years old. And as a result of working hard her entire life and saving and investing, she
has a considerable amount of money. Let’s say two hundred thousand dollars. And as
she gets older, she might be kind of concerned, like ‘Well, you know, I’m about
to pass away or my days are numbered or something. Um, you know, how can I be sure that this money will, you know, go to all of you, that I could help all of you,
you know, I don’t want to lose it to taxes, I don’t want the government to take it all.
What can I do?’ Now a lot of you who, you know, perhaps have been in this situation
before know that grandma can use a will or a trust or some combination of the
two. Um, but for a lot of reasons in reality, grandma or somebody in grandma’s kind of situation may not. So I mean some examples that I’ve run into, you know, for
example, somebody in grandma’s situation might think of themselves as not poor
but they also don’t think of themselves as rich. And for whatever reason, a will
or a trust is something that connotes, you know, ‘Oh, that’s you know,
that’s something that a rich person has. You know, average people like me don’t have those
things.’ For no particular reason that I can discern. There’s also a large
cultural component of this also. So let’s say that grandma grew up in another
country and even though she’s lived in the US for years and years, you know,
she’s not familiar with how the laws work here, she doesn’t really understand,
you know, a thing like a will and a trust, like it’s, you know, it’s all typed up in
English. She doesn’t understand it and stuff. So, you know, maybe she kind of
defaults to how things were done back in the home country. So, you know, you know, one default, I guess, that she could come up with would be that she would just add
somebody to her account as a joint owner. So in my scenario, let’s just pick on
grandson. So let’s say that grand, grandma decides to add grandson to her
bank account with the two hundred thousand dollars in it as a joint owner.
Now what, you know, most likely what grandma should do is that when she does
that she’ll tell grandson, ‘Ok you know, I’m adding you to the account
but, you know, this is only in case I pass away like, you know, while I’m still alive,
this money is mine, but when I pass away, you know, I’ll leave whatever money there
is to you and, you know, I’m hoping that you use that to buy a house, pay for your
education, take care of your children, etc. in a way that would have made me proud,
let’s say. So, you know, as you can probably guess there are a lot of
situations in which that happens perfectly. Grandsons, you know, are very
responsible. They do exactly as grandma says and everything’s fine. Unfortunately
you can probably also guess that there are a lot of situations in which that does
not happen. So there are situations, for example, in which grandson gets very kind of drunk on the money and, you know, he decides to withdraw all the money right
away even when grandma is still alive. Now can he do that, can he would draw all the
money and basically wipe grandma out? Unfortunately the answer is yes
because as I joint owner on the account, he has just every, er, he has
every right, rather, every right, every ability to access that money, to withdraw
that money that grandma has. I’m going to take that
scenario and twist it around a little bit. So the thing is let’s say that
instead of being, you know, somebody who wants to withdraw the money, let’s say
that, you know, grandson has a lot of debt or that he owes a lot of people money.
And that as, you know, as he gets sued for not paying his debts, you know, the
creditors will look and go ‘Oh my god there’s an account here with his name on it and
it has two hundred thousand dollars in it. Let’s go ahead and take that so, you know, we can get our debts paid off.’ Now in that case grandma is also wiped out.
All the money that she worked for basically, you know, grandson loses it, so
to speak, to pay off his debts. Now can that happen and, unfortunately, the same
answer applies: yes, because grandson is a joint owner on the account. In other
words being a joint owner does not, like it’s not the same as what grandma
intended. Grandma basically intended the money would be hers during life, but
when she passes away it goes to him. Now in order to do, to actually do something
like that, you really need to, er, grandma really should have done
something called a Non-Probate Transfer transfer, specifically a Pay-On-Death
designation. As you can probably guess from the name – it’s not a real creative
name – a Pay-On-Death designation basically is something like this. If we’re using the
example of a bank account, a lot of banks will have the capability of allowing an
account holder to specify an alternate, a beneficiary. So the thing is if you the
primary account holder pass away this person who is specified, er, whom you
have specified, will get the money automatically, whatever money is left in
the account. It doesn’t go through your will, it doesn’t go through your trust. It
doesn’t need to get probated. It happens automatically. Now if grandma had done
that, would that have prevented grandson from withdrawing the money during her
life? Yes. Would that have protected the money from, you know, grandson’s creditors steal, er, seizing it, I guess, levying it while grandma was still alive? Yes. The
reason why I think a lot of people, you know, in grandma’s situation don’t, like
why they don’t do that, not a lot of people know of, you know, pay on
death. They don’t even know that that’s a thing. So the thing is if you have a 401k, IRA, insurance policy or something, you might, if you want to go through your paperwork
for that, you most likely will see a beneficiary designation, a pay on death
beneficiary, sometimes abbreviated P.O.D., that’s basically what I’m talking about.
That’s an extremely powerful tool that really can simplify your estate planning
tremendously and it also prevents you from falling into the situation, I guess,
that grandma fell into where, you know, she’s still alive and you know this
person, unintentionally or intentionally, took all the money that she’s worked for.
So hopefully that made sense. The whole point of this video was to basically
educate all of you that Pay-On-Death beneficiary designation is a thing that
bank accounts, er, sorry that a lot of bank accounts, rather, have. Not
every bank account or not every bank, rather, offers it. Spme banks don’t offer
pay-on-death capability at all. Some banks offer it but only on certain
accounts. Other banks offer it on all accounts and it’s no big deal, like you
go in, you ask for it and you fill out a form, you sign it and that’s
basically it. It takes two minutes to do. So the important thing, though, is that you
have to go ask and if you ask and it turns out your bank does not offer P.O.D., pay-on-death capability, um, maybe you want to switch banks, maybe you want to come
up with some alternate way, but the important point though is that pay-on-
death is an option and it’s an option that can accomplish a lot of what most
people, like grandma in my example, want to accomplish without exposing them to
the risk, I guess. So hopefully that makes sense. Go ahead and watch this video
again, if you like. Non-Probably Transfers are actually tremendously powerful. They
can do a lot of stuff. They can make estate planning in general much, much
easier, much smoother. Both, you know, the actual act of estate planning and then
the actual act of administration once the person actually passes away.
So like I said hopefully that helped and go ahead and like ships, like, subscribe,
share, comment all that stuff and I will talk to you guys next time. Thanks.

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