Liz Weston: Living trusts offer smooth, more organized settlement than other probate-avoidance options

Dear Liz

: My goal is to avoid probate and allow simplified access for my heir, who is also my executor.

I have no family. I have chosen payable-on-death and transfer-on-death accounts instead of putting all financial assets in my trust, against the wishes of the attorney who drew up the trust for my condo. I am 79, with about a million in financial assets, with no debt or mortgage, and I am self-insured for long-term healthcare.

Is the decision to use these accounts appropriate for me?

Answer

: Please take the advice you paid for. The trust you have is probably a living trust, a flexible estate-planning device that avoids probate. Living trusts generally allow a smoother, more organized settlement of the estate than other probate-avoidance options.

The person who settles your estate is called your successor trustee and will perform much the same duties as an executor. But typically your successor trustee also can handle financial and other matters should you become incapacitated.

As covered in previous columns, payable-on-death and transfer-on-death accounts can be appropriate solutions for people with few assets who can’t afford to pay for a living trust. For more complex estates like yours, however, a living trust is the more appropriate option.

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Dear Liz

: You recently wrote that it’s easier to have one bank than many, but I worry about FDIC insurance limits because I have more than $250,000 in savings.

Answer

: You may be able to get more coverage at one bank than you think. FDIC insurance is per depositor, per ownership category, per bank. Ownership categories include single accounts, joint accounts, certain retirement accounts such as IRAs and trust accounts, among others.

If you’re married, for example, a joint account would be covered up to $500,000, or $250,000 for each owner. If each of you had single accounts, your total coverage for the three accounts would be $1 million ($500,000 for the joint account, plus $250,000 for each individual account). If you each had an IRA as well, you could have up to $1.5 million in coverage at a single institution.

Adding beneficiaries to your accounts turns either joint or single accounts into trust accounts, for FDIC insurance purposes. Each owner of a trust account is covered up to $250,000 per beneficiary, to a maximum of $1.25 million for five or more beneficiaries.

Liz Weston, Certified Financial Planner, is a personal finance columnist for

NerdWallet.

Questions may be sent to her at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the “Contact” form at

asklizweston.com.

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