Pay-on-Death Designations: Benefits Come With Risks

If you’ve gone to the effort of creating an estate plan, chances are you have a specific sets of goals you want to accomplish with your assets after you die, whether that involves benefiting your family, friends or charity. One way to thwart this entire well-laid set of objectives, though, is to leave behind a plan that is open to defeat in the courts. A careful structure to your plan may be the key to avoiding this trap.

recent article in the Wisconsin Bar Association’s monthly journal highlights the benefits and drawbacks of one tool for avoiding probate: the pay-on-death (POD) designation. POD designations can be a helpful and important element to an estate plan geared toward an objective of avoiding probate.

POD designations are convenient and inexpensive, but are not without risks. Sometimes, POD designations are especially vulnerable to a court challenge after you die. For example, say you have a friend who provides daily care for you in your later years and you decide to place a POD designation on your investment account leaving the entirety of it to your friend. Your will (or trust) leaves all of the rest of your assets equally to your children.

In this case, an unhappy child might decide to sue, claiming that your POD designation was the result of your friend’s undue influence over you. If this happens, Wisconsin law says that your friend cannot testify regarding what you told him/her about why you made the POD designation. With that impediment, it may become more difficult for the court to see your true intent, and easier to conclude (erroneously) that your friend exerted undue influence over you.

There are a variety of ways to avoid this. One is to leave a clear trail of evidence about your decisions, and the reasons for them. Talk to impartial friends or relatives about what you’re doing and why you’re doing it. Write down your decisions and the specific reasons for them. This helps avoid a situation where the court, as evidence before it, has only the testimony of a disgruntled relative about a suspicious figure who spent time with you before your death and walked away with a sizable portion of your assets.

Alternately, perhaps avenues other than a POD designation provide a better and safer means of carrying out your goals. Structuring a special benefit through your will,
living trust or another method may be preferable, depending on your circumstances.

If you have unique or unusual estate planning objectives, it is wise to obtain the advice of an experienced Wisconsin estate planning attorney, to ensure that your plan is best suited to weather any challenges that may come after your death. Madison trust attorney Daniel J. Krause of Krause Law Offices LLC has extensive knowledge crafting a full spectrum of estate and trust plans for any type of situation. Consult Attorney Daniel J. Krause to find out what type of plan best meets your goals and desires.

Contact us through our website to schedule your confidential, no obligation initial consultation.

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