What You Need To Know About Protecting Your Money

By | Tuesday, March 22, 2016


During the course of a three-hour class that occurs from 6-to-9 PM after working a full day, the mind may begin to wander. I, on occasion, will begin to plot my next travel adventure or wonder when I’ll be able to get another dog or fantasize about reaching that next money goal (it borders on an unhealthy obsession). During one these moments of brain relaxation, I heard the statement, “or else your money could end up stuck in probate court.” My mind immediately snapped back from picturing Mosby frolicking in a three-acre backyard with two new canine sisters (pit bulls in case you were wondering) and honed in on my professor.

She went on to give a high-level explanation of probate court, which I will sum up as: the tenth circle of hell in which the government (well the court of your land) gets to determine where and to whom your assets are distributed after your demise. The next day I immediately phoned up my bank and double-checked on my investments to ensure the proper precautions were taken to keep my money out of probate court. Unless you simply have no care about passing along your assets (even the most meager sums) to a loved one upon your death, or you really just think it should get partially squandered on needless court fees because you were too lazy to take 10 minutes of your life to get your house in order, then that’s on you.

For the rest of you, there’s a simple, two-pronged solution to keeping your money out of probate court.

The first solution is incredibly simple, and honestly will take probably a collective 30 minutes of your time, depending on how many financial institutions you use. In fact, when you set up your work 401(k) or your IRA or whatever other investment you might be using, there probably came a time you were prompted to designate a beneficiary. The second takes a bit more time, and can actually cost you money, but it’s important to have a will once you have some assets in your name. Until then, the beneficiaries will probably do. Yes, you do need to read this if you only have a couple hundred bucks and barely anything in your 401(k). I can sense what so many of my fellow millennials are thinking. “Please, I only have a few hundred bucks to my name. Why does it matter?

Well, don’t you still want your parents or siblings to get those few hundred bucks? At the very least, it could offset some of the costs of your funeral. And, if you don’t die soon (which you probably won’t) then you’re all good to go as that savings account and retirement account(s) grow and you suddenly do have a sum worth passing along.

Protecting Your Money In 3 Steps.

STEP 1: Set up beneficiaries with a PoD and a ToD.

It’s incredibly simple to set your beneficiaries up. You can probably just log into your bank or investment portal and put beneficiary in the search bar and be directed to the appropriate place. Otherwise, call up customer service and say you want to set up a Payable on Death (PoD) for bank accounts or a Transfer on Death (ToD) for investments. In many cases, you might have already set up a beneficiary when opening a retirement account or investment account. You will need your beneficiary’s full legal name, birth date and possibly Social Security number in order to complete the process.

STEP 2: Tell your beneficiaries.

Cailin (my sister) got a morbid text a few months ago. “Hey, can you call and tell me your Social Security number? I need it to name you as a beneficiary on my accounts.” When she called, I explained that I wanted to set it up so she’d inherit all my money upon my death from two savings accounts, two checking accounts, a 401(k), both a traditional and Roth IRA as well as a handful of index funds. I told her the financial institutions I used, so it would be easier for her to track them down. In full disclosure, our family is pretty comfortable talking about death, wills and inheritances. Well, she doesn’t get everything. One savings account is earmarked for Peach because he’d inherit Mosby, should I meet my maker prematurely, so I’d like him to have a little money to use towards caring for my dog-son. Setting beneficiaries is important, but it’s also important that they know so it simplifies the process. Grieving is an awful time, so everything you can do to make it easier for your loved ones the better. And setting it up so they don’t have to worry about your estate is a beautiful parting gift.

STEP 3: Check in on your designations as life events occur (they trump your will).

The final piece is to check in on your designations each time a life event occurs. Some examples being: marriage, the birth of a child, divorce, re-marriage, death of an existing beneficiary. Hopefully, only two of those actually happen to you (you be the judge of which ones), but each time a life event occurs it may mean a shift in your beneficiaries.

For instance, if Peach and I get married, then my sister will get knocked off as my primary beneficiary (sorry, Cailin) and it will change over to Peach. Then if Peach and I decided to have/adopt kids, then they would likely also be named as beneficiaries. It’s important to keep tabs on beneficiaries because they often supersede a will. Unfortunately for many a second-spouse, a beneficiary on an account will inherit funds even if the will has been updated to remove spouse #1 and leave everything to spouse #2. You can image how many a scorned first spouse has been tickled with delight when the ex forgot to update beneficiaries.

BONUS! A parting gift!

As a congrats for reading about this most morbid topic, one that makes many people uncomfortable, I leave you with a parting gift.

Ron Swanson and I agree on many things, but this is not the way to plan your estate.


Image via Unsplash


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