Social Security (and other government payments from Civil Service, military, IRS) is the fly in the honeypot. Somehow, the government has managed to get laws passed that go around ALL of the state laws on joint bank accounts and survivor rights.
My state law on joint bank accounts says: Alabama Code Section 5-24-12 Rights at Death: (a) Except as otherwise provided in this chapter, on death of a party, sums on deposit in a multiple-party account belong to the surviving party or parties…(d)The ownership right of a surviving party or beneficiary…is subject to requests for payment made by a party before the party’s death, whether paid by the financial institution before or after death, or unpaid.
That clause (d) allows the federal government to swoop in when a Social Security recipient dies, and freeze the account, supposedly so that they can then recover the last government check that was deposited automatically in the account-- before anyone else is allowed to make any withdrawals. In reality, the last-payment recovery should take about 5 minutes by a computer-to-computer transaction. The banks love these freezes, pretending it is entirely out of their hands. The longer the freeze can be extended, the better for them, because the frozen account money becomes part of their “float”, money that can be loaned out in short-term or overnight loans to other banks.
I am not sure yet, but right now I think these bank freezes of jointly-held accounts can only be done legally on accounts that are set up to receive automatic payments from the federal, and some state, governments. If so, then the way around this is to have two accounts, one to only receive Social Security and other government payments, and another one for everything else, maybe in a slightly different account name so they can’t claim it is part of the same account. This second account is the one to have multiple joint beneficiaries, that should then be able to access it after the death of the primary account holder.
It is sad and aggravating that we have to plan ways to go around our own government. They should be working FOR us, not against us.
Another glitch… I’m in one of those states with an inheritance tax. Oh, I feel sorry for my executor! My beneficiaries are not a spouse or children, so there is inheritance tax to be paid. Nobody wants to pay taxes, but it’s the hassle (filing papers and returns) that I dread for my beneficiaries.
But I’m going to look into a trust to minimize the hassle of probate.
I can also see the other side – where one family member might swoop in and take all of the money from an account or charge up credit cards, etc. and not honor the wishes of the deceased. So from that standpoint, I understand why accounts are closed upon death.
But, if I made someone a joint account holder, it seems to me that the account should stay open because the other owner is alive.
I am not sure yet, but right now I think these bank freezes of jointly-held accounts can only be done legally on accounts that are set up to receive automatic payments from the federal, and some state, governments. If so, then the way around this is to have two accounts, one to only receive Social Security and other government payments, and another one for everything else, maybe in a slightly different account name so they can’t claim it is part of the same account. This second account is the one to have multiple joint beneficiaries, that should then be able to access it after the death of the primary account holder.
Access credentials aren’t the problem, I don’t think.
I had credentials for my dad’s accounts, as POA.
That didn’t matter once he passed – the accounts were shut down – I had no access at all.
And – I don’t think I’d trust Google with my information…
I have a couple of stories to tell. The first was when my Father passed away overnight in 1978 at age 58 with no warning. When the banks opened she had us go and cash checks on the accounts. She and he often signed each others names to documents so I am not sure if some of the accounts were just in his name. She was not draining the accounts but needed to ensure she had cash before the bank accounts were frozen. This also may be one of the only cases where what Clark alles ‘croack and choke insurance’ paid off. Dad had bought new appliances and furniture for the house and had that crappy insurance on it. He died before he made the first payment and we did not have to pay for any of it. Granted, we would have rather had Dad alive, but at least we did not have a heavy financial burdeon for those purchases.
The second case involved a good friend of mine who passed away recently after illness. We saw his health decline and his weight greatly reduced. He eventually had to receive blood transfusions when his own body was not making red blood cells. His partner was not good with finances and I encouraged the friend to start getting things in order. He put all his passwords in a password management program to which I have a copy. He went to a lawyer to arrange some things and he even changed the logons to most accounts to be in the partners name. I am still trying to review accounts to find out what is paid where and from what funds. It has not been easy to help straighten things out however that is what friends do.
I have started documenting my own accounts so that my Sisters have all that information. It includes what bills are paid where and how. It would be better if they all went to one card or account, but life is never that organized. I have even written an obituary as the girls have not been around me much and know little about where I have worked and what I have accomplished. I have a copy of my trust, will and medical directive all available to them including how I would like things to happen after I die.
I have had too many friends and relatives pass away with little or no warning. In my case, having the trust is a way to help certain aspects continue with no interruption.
I have started documenting my own accounts so that my Sisters have all that information. It includes what bills are paid where and how. It would be better if they all went to one card or account, but life is never that organized.
I think about people who have a hoarder relative die, and the mess they inherit. But at least you can see the mess!
With online accounts, bills, etc., and if the person didn’t document things – it’s an invisible mess that requires detective work to sort out. And if bills go unpaid (ex: internet email, cloud subscriptions, etc) then any access to emails or files would be cut off, unless the person backed everything up on a hard drive or hard copy!
I think the big change from 50 years ago is that at one time, with the belief in private property and private ownership, a person’s bank account belonged to him until death, then it passed to his family or other beneficiaries WITHOUT QUESTION or HINDRANCE. Now when someone dies, some other authority steps in and takes control of their accounts. It is the socialist view that people can’t manage their money (and should never actually own money or property in the first place) and need some government authority to step in and help out. It scares me just how much our rights have been eroded away in my lifetime. If given a choice to live another 100 years, I would have to think about it a long time. It might not be worth the hassle.
If you’re the original trust owner, yes. If you’re the successor trustee, no. Do you think all the successor trustee has to do is provide a death certificate?
Exactly, why create even more expensive, legal-beagle problems for my beneficiaries? Simple is best for me. I don’t want a trust or any additional legal documents. My existing life-estate deed has already handled disposition of my house, and the beneficiary list on the remaining accounts will supersede even a will or trust document. I can’t put something in a trust if I have already given it away. All that will be left is the small amount in my checking account, which may get frozen up when I die. I won’t really care if it stays frozen forever. Let the bank hold on to a few $hundred forever if that makes them happier.
Requirements for trusts vary by state. Most states have codified the registration of trusts. ie: "DUTY TO REGISTER TRUSTS. The trustee of a trust having its principal place of administration in this state shall register the trust in the court of this state at the principal place of administration."
In most cases a will is used to transfer the grantor’s remaining property, (property not already in the trust,) to the trust and the language in the trust guides the successor trustee(s) in the disposition of the trust’s assets.
That said, there’s a gazillion variations and types of trusts to handle different situations. But a simple trust can be used for a simple situation and can cost as little as $1,000 to $1,500.
I’d rather you didn’t make this into a political thing, but since you started – it’s the Republican way to let the corporations and wealthy do what they want and then have the public sector pay for it, bail them out or fix the mess ---- whether it’s funding their sports stadiums, cleaning up their environmental messes, bailing out banks or businesses that are “too big to fail”, taking care of the poor because corporations won’t pay a living wage (with their ideal of being no wage, which is slavery). You can go on about “socailism” but Republican unbridled capitalism benefits the wealthy at the expense of everyone else. The rich and corporations are big users of government money and expecting government to step in and fix their messes.
And the Republican view would be that ownership would be for the wealthy and corporations only – look at what’s happening to the housing supply being bought out by LLCs and hedge funds. Pretty soon, few regular folks will be able to own a home. The wealthy and corporations don’t want people to own things.
But I had hoped that this would be a discussion about bills after one passes…
(normally I’m not political, but I do have strong opinions about settling estates of deceased persons)
I think the main reason why settling an estate is more hassle now than 50 years ago is because a few people in the past have made mistakes, found loopholes, absconded with assets not theirs, evaded taxes, failed in their executor/administrator duties, etc. Americans like being clever, so they come up with ways to circumnavigate laws, call it freedom if you like. In some cases, banks and fiduciaries have been held liable for releasing funds to the fraudsters, so they have their own regulations to protect themselves. It’s annoying that most of us, good, law-abiding folks have to jump thru hoops designed to prevent fraud and/or reduce liability, all the while we’re bewildered as to why we have to.
Another reason is there are simply more people now, so that naturally increases the numbers of mistakes, fraud, and new laws & regulations to combat it. And more families now are complicated by multiple marriages and step-children. Yikes.
I completely agree with what you said, though I have not gone through the process myself, yet. (and I won’t, because I’ll be dead if/when it happens!).
But my thinking is that my siblings, nieces, and nephews will result in 8 people having to file inheritance taxes in my state, where they don’t even live!! What a hassle!!
I’m looking at trusts, and I’m also considering making only my siblings my beneficiaries with a separate note to them of my wishes that after they settle the inheritance tax, they give their kids the portion that is my wish for them to have. I remember being younger and needing money, so I want them to get some of the money to help them out. It would be easier to have only my siblings deal with the inheritance tax and then once the smoke clears, they divvy up the money between themselves and their kids.
I thought I was being smart with a will and beneficiaries, but this has thrown a wrench in the process.
Of course – I may at some point move out of my state, which can eliminate the problem. But my house is paid off, I love where I live, and now is not the time to buy a new house!!!
And I do have a financial advisor with my 403b account, so I am picking their brain and asking for resources in addition to reading up on the topic.
I don’t want to cheat the system, even though it is unfair when it comes to heirs who are not spouses and children.
I also wrote to my state senator and assembly-people about the issue, just to make them away. But there’s money at stake, so I don’t know that they will change the process.
Thank you for all of your feedback on your experience!
We have a similar process in my state for real estate sales, where the selling prices are high.
In the past, people would sell their home or 2nd home and not pay the taxes. They moved out of state and there was no way that my state could track them down to pay the capital gains, which they benefited from because real estate is in demand here, and almost always goes up. Also, out-of-state folks bought vacation homes, sold them, and then never paid the capital gains!
So years ago, the state changed the process – when a property is sold, at closing, the seller must leave a percentage from the sale price to cover the capital gains. Then they must file a return to recoup any excess capital gains, even if they are out of state.
People complain about the “exit tax” and how unfair it is. But I think that people that skip out of town or don’t live in the state and buy investment properties are cheating the system, while residents must pay the gains! They get the money back if they had less than a threshhold of capital gains, which is quite fair. If they made a ton of money, they owe capital gain taxes, end of story.
