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What Happens If the Executor of a Will Dies?

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When someone passes away, it’s up to their executor to handle the probate process. But what happens if the executor of a will dies? While that’s a rarity, it can create complications as someone else will need to fill the executor role. Naming a successor executor is one way to avoid that scenario and other contingencies that might affect the settlement of an estate.

Talking to a financial advisor can be helpful for planning ahead for any obstacles that may arise during probate.

An Executor Plays a Pivotal Role in the Estate Settlement Process

In estate planning, an executor is someone who is charged with settling the estate of a deceased person. When someone writes a will, they can name a person of their choosing to act as executor. If someone dies without a will in place or did not name an executor, any interested party may petition the probate court to become the executor.

What does the executor of a will do? Broadly speaking, they settle the estate during the probate process. The duties and responsibilities of an executor include:

  • Creating an inventory of the deceased person’s estates
  • Notifying creditors of the person’s passing
  • Liquidating estate assets to pay creditors if necessary
  • Distributing remaining assets among the decedent’s heirs, according to the terms of their will

Executors are obligated to follow a fiduciary standard when settling estates. That means they must act in the best interest of the decedent’s heirs at all times. If they fail to do so, an executor can be removed.

What Happens If the Executor of a Will Dies Before the Testator?

The testator is the person who makes the will and the person on whose behalf an executor acts during probate. If the executor of a will passes away before the testator, then a new one can be named. That may require the testator to amend an existing will or nullify it and draft an entirely new one to change the executor.

If the testator takes no action and doesn’t amend their will or write a new one, then it’ll be up to the court to name an executor once they pass away. Again, any interested person can petition the court to become the executor.

That takes the burden of naming an executor off of the testator. However, it leaves the door open for someone who may not be qualified to step into the role, or who might not have the wishes of the testator in mind when executing the will.

What Happens If the Executor Dies During the Probate Process?

If the executor dies during the probate process, a successor executor can step in to finish the estate settlement. That assumes, however, that the testator was forward-thinking enough to name one or more successor executors to prevent the estate from being left without one.

When there is no successor executor named in the decedent’s will, then the court will have to name one. If only one person has submitted a petition to become the executor, the job might go to them. However, if there have been multiple petitions submitted the probate court can weigh the merits of each one before deciding.

How to Avoid Complications If an Executor Dies

If you’re the person who’s making a will, the easiest way to avoid complications that may result from the death of an executor is to name one or more individuals to succeed them. That way, if the executor passes away before you do or during the probate process, there will be someone else waiting in the wings to take up the reins.

You could also consider putting some of your assets into a trust, which would allow them to bypass probate altogether. With a trust, a trustee is in charge of managing assets on behalf of the beneficiaries that you name. You’ll have to name a trustee in this case, which could be the same person as your executor but does not have to be.

Placing certain assets in trust could avoid complications following the death of an executor since the trustee would be responsible for distributing them anyway. Instead of waiting for probate to conclude, the trust beneficiaries would be able to access their inheritance according to the terms you set in the trust document.

The Executor’s Guide to Probate Bond

As mentioned, acting as an executor entails certain responsibilities and you’re obligated to follow a fiduciary code of conduct. Before someone can be appointed as an executor, the court may require a probate bond to be issued.

Probate bonds are designed to ensure that estate executors act in good faith and do not abuse their privileges. The bond protects the estate’s beneficiaries, not the executor, but the executor is the one responsible for purchasing it.

A probate bond is essentially an insurance policy against any financial losses that might occur if the executor abuses their power or otherwise mismanages the estate. The amount of the bond can correspond to the amount of the estate in question.

If all the parties involved in the settlement of an estate agree, then a waiver of bond can be submitted to the court. However, that can leave the beneficiaries of the estate open to losses if the executor fails to do their job properly.

How to Transfer Vehicle Ownership of the Deceased

One common question executors may have to deal with is how to transfer a car title after the owner dies. The answer can depend on several factors, including whether the car was owned by one person or multiple persons and whether any provision was made in a will for its transfer.

If the title to the vehicle has more than one name on it, then the surviving owner may inherit the vehicle automatically. They can change the title to put in their name only, without any further intervention from the executor.

When the title is in the name of the deceased owner only, the title will have to be changed to whoever is going to assume ownership. If the car is included in probate because it hasn’t been transferred to a trust, then you likely won’t be able to do that until probate ends and ownership of the car is assigned to one of the decedent’s heirs.

There are a few documents you’ll typically need to transfer a vehicle title after death:

  • A copy of the owner’s death certificate
  • The original title
  • Probate court documents allowing the transfer

The process for transferring vehicle ownership after someone passes away can vary from state to state. It may be a good idea to consult probate rules and the local DMV to determine what’s needed to complete the transfer.

How Much Does It Cost to Probate a Will?

The amount of money required to probate a will can vary by state. It’s common, however, for the cost to range anywhere from 3% to 8% of the estate’s value. In terms of what’s involved, the various costs can include:

  • Court filing fees
  • Attorney’s fees
  • Fees paid to accountants
  • Certificate fees for official documents
  • Notification fees if you’re required to publish a public notice for creditors
  • Probate bond fees
  • Appraisal fees if you need to determine the value of estate assets
  • Postage and mailing fees
  • Storage fees if you have to keep assets in storage before probate ends
  • Notary fees, if necessary
  • Fees paid to the administrator of an estate sale, if applicable

It’s the executor’s job to keep track of fees associated with probate and pay them out of estate assets. There is one exception, as executors who are required to purchase a probate bond must typically pay the fee for that themselves.

Also, keep in mind that the executor is entitled to collect a fee for their services. The fee can vary from state to state but it’s not uncommon for an executor to receive anywhere from 2% to 5% of the estate’s value for their time.

The Bottom Line

Knowing what happens if the executor of a will dies can help you to avoid headaches if you find yourself dealing with that situation when a loved one passes away. Taking care to build some protections into your own estate plan by naming successor executors or setting up a trust for certain assets can allow for a smoother probate process after you’re gone.

Estate Planning Tips

  • If you’re named as the executor to a will, it’s important to know what obligations you have and how to avoid any breach of fiduciary duty. Talking to a financial advisor can give you a better understanding of what’s expected of you. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • If you don’t have a will in place yet, you might want to consider drafting one. You could hire an estate planning attorney but it’s easy to draft a will online if you have a fairly simple estate. You may also consider adding a trust, power of attorney and advance health care directive to your estate plan to cover all the bases.

Photo credit: ©iStock.com/PeopleImages, ©iStock.com/shapecharge, ©iStock.com/kate_sept2004

Rebecca Lake, CEPF®
Rebecca Lake is a retirement, investing and estate planning expert who has been writing about personal finance for a decade. Her expertise in the finance niche also extends to home buying, credit cards, banking and small business. She’s worked directly with several major financial and insurance brands, including Citibank, Discover and AIG and her writing has appeared online at U.S. News and World Report, CreditCards.com and Investopedia. Rebecca is a graduate of the University of South Carolina and she also attended Charleston Southern University as a graduate student. Originally from central Virginia, she now lives on the North Carolina coast along with her two children.

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How Does an Inheritance Advance Work? – SmartAsset

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Taking an inheritance advance is something you might consider if you expect to receive money from an estate, but don’t want to wait for probate to conclude. An inheritance advance, also called a probate advance or probate cash advance, allows you to receive a lump sum of money upfront.

In exchange, you agree to allow the advance company to purchase part of the inheritance. An inheritance advance can put money in your hands quickly, but there are some drawbacks to keep in mind. We will go over the details.

Talking to your financial advisor can help you create a plan for managing an inheritance.

Understanding Inheritance Advances

An inheritance advance is an advance against assets you stand to inherit. It’s similar to a payday advance loan in that you’re getting access to money now that you would otherwise have to wait until later to receive.

An inheritance advance is not a loan since you don’t pay anything back to the lender directly. Instead, you’re allowing the advance company to make a claim against part of the inherited assets you expect to receive. Once probate ends, the estate can pay out the agreed-upon amount to the advance company and forward any remaining assets to you.

Here’s an example of how an inheritance advance might work. Let’s say that your parents leave you $100,000 in their will when they pass away. After probate fees and expenses are paid, you expect to inherit $90,000. But you need $25,000 right now to pay for your child’s college tuition expenses.

You decide to work with an inheritance advance company that requests to purchase 30% of the inheritance or $27,000. In the meantime, the company agrees to pay the $25,000 you need to you in a lump sum. Once probate ends, the advance company collects the $27,000 it purchased and the $25,000 that was advanced to you from the estate, along with its fee. The remaining inheritance money would then be paid out to you.

Benefits of Inheritance Advances

There are several advantages associated with inheritance advances, starting with fast and convenient access to cash. While a probate loan may take several days or weeks to get approved and funded, it may be possible to get an inheritance advance in as little as 24 hours after approval.

Inheritance advances typically don’t require any credit checks, which could make them a good option for borrowers with poor credit. You won’t pay interest on an advance, though again, the lender can charge a flat fee.

An inheritance advance is a flexible way to borrow since you can use the money to cover just about any type of expense. You don’t have to offer any collateral for the advance.

And you don’t have to worry about making payments either since the advance company collects the amount owed to it directly from the estate.

Drawbacks of Inheritance Advances

Taking an advance against an inheritance can have some downsides. And they may not be right for everyone. The obvious drawback is you’re sacrificing part of your inheritance for the convenience of being able to get cash today.

Going back to the previous example, you’d have to consider carefully whether handing over $27,000 plus fees to the advance company is worth getting the $25,000 you need now to pay for education expenses. You might find that another funding option may be preferable.

For instance, taking out a Parent PLUS loan or even a private student loan might be a better alternative. Or you might decide to get a home equity loan instead if you’re comfortable using your home as collateral.

When to Consider an Inheritance Advance

The best time to consider an inheritance advance is when you need money and you’re certain that an inheritance is coming your way. Inheritance advance companies may not advance money to you if there are any doubts about how much you’ll receive or whether you’ll inherit from someone at all.

You might get an advance against your inheritance if you need money urgently and you’ve considered all other borrowing options. Other possibilities for borrowing can include home equity loans, a home equity line of credit or a personal loan. For smaller expenses, you might consider a credit card instead.

If you’re considering an inheritance advance, it can be helpful to estimate how much money you’ll need. You can then shop around to compare inheritance advance companies to see what you might be able to get upfront. Talking to a financial advisor can help you weigh the pros and cons if you’re on the fence about whether an advance is the right move.

How to Get an Inheritance Advance

To get an inheritance advance, you’ll first need to find a company that offers them. You can search online for inheritance advance companies, as this type of funding usually isn’t available at banks or credit unions.

Next, you can look at the advance company’s requirements to see if you’re eligible for an advance. If you’re not sure whether you qualify, you can contact the company for a consultation. If you are eligible, you’ll need to share some details about the inheritance and provide certain documents, including:

  • Copy of the death certificate
  • Copy of the will if one is available to you
  • Probate petition and letters of administration
  • Valid ID

You’ll also need to give the advance company the name of the executor or trustee who’s handling the estate settlement. You won’t need to provide information about your income or credit scores.

Once the inheritance advance company has everything it needs, it will review your case and make an advance offer. If you accept the offer, the inheritance advance company will pay the money to you, sometimes as quickly as 24 hours later.

Choosing the Right Inheritance Advance Company

An internet search will turn up a number of results for inheritance advance companies, like inheritancefunding.com for example. But it’s important to find the right one to work with. When comparing inheritance advance options, it’s helpful to consider:

  • How much you can get from an advance
  • What percentage the advance company purchases
  • Any fees you might pay and when those are due
  • Funding speed

It’s also important to look at the company’s overall reputation. Reading customer testimonials and online reviews can give you a better idea of how easy an inheritance advance company is to work with and how satisfied its customers are.

Bottom Line

An inheritance advance can provide financial relief if you expect to inherit money. But time is of the essence. Taking an advance against inherited money does come at a cost, which is important to remember. Looking at all of the pros and cons, and considering other funding options, can help you decide whether an advance makes sense for you.

Estate Planning Tips

  • Planning out your entire estate can seem overwhelming and difficult. But a financial advisor who specializes in estate planning can help. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • If you have a sizable estate, estate taxes on either the state or federal level could be hefty. However, you can easily plan ahead for taxes to maximize your loved ones’ inheritances. For example, you can gift portions of your estate in advance to heirs, or even set up a trust.

Photo credit: ©iStock.com/shapecharge, ©iStock.com/PeopleImages, ©iStock.com/Drazen Zigic

Rebecca Lake, CEPF®
Rebecca Lake is a retirement, investing and estate planning expert who has been writing about personal finance for a decade. Her expertise in the finance niche also extends to home buying, credit cards, banking and small business. She’s worked directly with several major financial and insurance brands, including Citibank, Discover and AIG and her writing has appeared online at U.S. News and World Report, CreditCards.com and Investopedia. Rebecca is a graduate of the University of South Carolina and she also attended Charleston Southern University as a graduate student. Originally from central Virginia, she now lives on the North Carolina coast along with her two children.

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More than 50% of Americans will be diagnosed with a mental illness or disorder during their lifetime, according to the Centers for Disease Control and Prevention. Chances are, some of these individuals will be inheriting wealth at some point.

If a family member’s mental health issues may interfere with their ability to manage finances, answering these questions could help them create long-term financial stability.

Have I set up a trust?

Setting up a trust is one way to transfer wealth to a loved one and create financial stability for them. A trust enables you to leave specific instructions for trustees about how to care for your loved one and distribute assets.

Trusts can be especially helpful for transferring assets to loved ones who have a mental illness but are still able to function independently. While these loved ones are often independent, they may still have difficulty managing assets on their own, says Lillie Nkenchor, an attorney who does estate planning in New York. One example includes someone with depression.

“You can put assets in a trust,” Nkenchor says. “It can simply be a trust that says, ‘This money is to be used to take care of my sister who is high functioning, but is not great with money.’”

Likewise, you can request money be allocated to health care expenses and anything else that helps them live a healthy and functional life. Having a trust in place can also help beneficiaries avoid probate, a court process for handling estates that could be stressful for someone who has a mental illness.

Does my loved one receive government assistance?

Another important question to ask is whether the person receives government assistance or may need to in the future. While a basic trust may suffice for a loved one who has a mental illness but mostly functions independently, it could negatively impact one who doesn’t and receives government assistance.

“We want to make sure that if we are caring for someone who’s receiving that type of benefit, we don’t accidentally leave them something that disqualifies them from that benefit,” Nkenchor says.

People who receive government assistance may have limits on how much they can have in assets. For instance, to be eligible for Supplemental Security Income through Social Security, they generally can’t have resources of more than $2,000 as an individual or $3,000 as a couple. That is, unless you put those assets into a special needs trust. It’s an estate planning tool for individuals with disabilities or functional needs.

“The special needs trust is meant to supplement government benefits that person is receiving. It doesn’t replace it, it’s meant to supplement it,” Nkenchor says.

Nkenchor adds that a standard special needs trust isn’t effective until the person who establishes the trust dies. So, if you plan to financially support your loved one while you’re alive while they receive benefits, consider setting up a stand-alone special needs trust. Since setting up an SNT can be complicated, it’s advisable you speak to a professional who specializes in this area. The Special Needs Alliance website has a directory that can point you toward attorneys for special needs planning to help you get started.

Have I named the right trustees?

The estate managers you name will be responsible for distributing assets to your loved one when you die or if you’re incapacitated. Talisa Utsey, an independent estate planning attorney licensed in Maryland and New York, says a mistake some people make is not appointing the right trustee. She adds that people sometimes take advantage of older adults, young people and those with mental illnesses.

You have two options: someone you know or a corporate fiduciary. Utsey says if you opt for the former, choose someone who has a good relationship with the beneficiary. You also want to be sure they have some knowledge of estates or can get advice from someone who does.

“If they are not familiar with estate administration, if they’re not familiar with the documents that give them the authority, they’re not familiar with their actual authority, then that can be harmful,” Utsey says.

Alternatively, you may choose to appoint a corporate trustee since they’re usually experienced and have no emotional investment. For example, you could use a financial institution like a bank. Just know that corporate fiduciaries often charge heavy fees.

Utsey also advises appointing at least one successor trustee — a person who takes over trustee duties if the initial trustee can’t serve. And don’t forget to consult with prospective trustees first, Utsey says: “Make sure that the primary and the successor are both interested in taking on that type of responsibility.”

Is my estate plan clear?

To protect your loved one from financial abuse and prevent mishandled funds, you want your estate plan to be clear and streamlined, Utsey says. This means ensuring all your accounts and assets are addressed to the trust, none are in your loved one’s name, and there are clear directions about how money is spent. All assets should flow through the trust if possible.

“When there’s a plan, there’s less likelihood of manipulation and funds being wasted because it’s clear, it’s a process and it’s written down in plain English, and black and white,” Utsey says. “And to some extent, it’s legally enforceable when it’s done the right way.”

Being clear will also help the trustee execute your plan with ease.

Source: nerdwallet.com

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Does a Will Override a Trust? | SmartAsset.com

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Wills are an essential part of estate planning, leaving instructions for how to distribute your assets and possessions after you die. Trusts are a common tool in estate planning as well, serving as a way to manage assets both before and after your death. If your will conflicts with a trust that you have set up, the trust will typically prevail. This is because, in most cases, the assets in a trust don’t technically belong to your estate any longer. They are legally owned by the trust itself, so the terms of your will don’t affect them. For help with estate planning, consider working with a financial advisor.

Will Definition

A last will and testament is a legal document that directs how to distribute your assets after your death. Among other issues, a will establishes:

  • Who will take possession of your cash, investments, belongings and other property
  • How to pay any remaining debts or obligations
  • Any long term or ongoing plans that you would like to make
  • The care and distribution of any real estate you own

Wills are an essential part of estate planning. When you die, everything that you own is collectively known as your estate, which then gets distributed among your heirs.

If you leave a will, your estate is distributed according to your wishes and that process is overseen by someone you select, known as the executor. If you die without a will, known as dying intestate, your estate is distributed according to the inheritance law of your jurisdiction. That process is overseen by someone appointed by the probate court, known as an administrator.

Under typical circumstances a will is managed through and by probate courts. Your executor will file your will with the court which in turn oversees the entire process of settling your affairs and distributing the estate’s assets. For most estates, the probate process is largely a formality. The court makes sure that your will is legal, that your estate pays its debts and that your executor has the access they need to distribute your assets.

The same process occurs if you die without a will. In that case, the probate court appoints an administrator and the court then ensures that the administrator distributes your assets according to the local inheritance laws.

Trust Definition

A trust is a legal entity created to hold, manage and oversee property. Every trust has four main components:

  • Contributor – The person who created the trust and contributed assets to it
  • Assets – The cash, property and other assets owned by the trust
  • Trustee – The individual or firm that manages the trust’s assets
  • Beneficiary – The person or persons who receive assets from the trust

When you create a trust, you put assets in its name. Once you do that the assets belong to the trust itself, not you. This is the same as with any other property transfer. The trust is a legal entity capable of owning assets, paying taxes and making distributions, so once you put something in its name that property legally belongs to the trust itself, not you.

In creating a trust, you also establish its terms. You name the trustees and the beneficiaries, and set out the terms for how the trustees should manage the trust and its assets. This includes instructions for what assets the beneficiaries will receive, along with how and when. For instance, you can leave instructions for your trustee to distribute your funds equally among your children after you die.

Can a Will Override a Trust?

There are two main circumstances in which a will can conflict with a trust. First, a will might give instructions that conflict with the terms of a trust that already exists. For example, your will might include language that leaves the family home to your children, while earlier in life you placed that house in a trust for tax purposes. Second, a will might give instructions that conflict with the terms of a trust that doesn’t exist yet, or which hasn’t yet received its assets. For example, your will might include language that distributes your investments among your children, while another section of the will might include language that places your investments in a family trust.

In the first case, the terms of the will have no authority. A will cannot override a trust that already exists, nor can it distribute or manage property already held in an existing trust. If a trust exists and holds its assets, those assets belong to the trust itself. They are not part of your estate and, as a result, are not subject to the terms of your will.

If your will gives instructions that conflict with the terms of a trust, your will’s terms will apply to the assets in your estate and the trust’s instructions will apply to the assets in the trust. The designated beneficiaries will receive their assets according to the terms of the trust.

In the second case, your will is not actually conflicting with any existing trust. Instead, it is internally contradictory and will be resolved according to local inheritance law. You can leave instructions in your will to put assets in trust. This can apply to a trust that already exists, where your will puts assets into a trust that you created earlier. It can also apply to a testamentary trust, where your will instructs the executor to create a new trust and put assets into it.

In both cases, these assets belong to your estate when you die. This means that the terms of your will govern how those assets are distributed. If one section of your will conflicts with the section of your will which creates or contributes to the trust, then the issue is that your will is internally contradictory. The trust itself is not in question, just the will.

In that case the probate court and your executor will have to determine the exact nature of the internal conflict in your will. They will then resolve that conflict according to state and local inheritance law.

Your will still cannot supersede how an existing trust manages its assets. But conflicts in your will can prevent new assets from being added to the trust. This is why, if you plan on making or managing a trust, it’s wise to have a lawyer help you write these documents.

When Should You Use a Will vs. a Trust?

Wills and trusts are, generally, the two most significant vehicles for estate planning. Broadly speaking, if you are looking to leave assets to your heirs, you will likely use one or both of these. While a full exploration of the subject is beyond the scope of this article, there are some good rules for when you should use a will vs. a trust. Wills and trusts are not mutually exclusive; their control over specific property is. Any given asset can either be put in trust or distributed by a will – but not both. However, you can manage your estate in general by putting some assets into a trust and distributing others through a will.

Wills – Good for mid-sized estates, simple transfers and instructions

In general, wills have the benefit of simplicity.

While wills do not have the tax and probate benefits of a trust, the truth is that these concerns are frequently overstated. The federal estate tax only applies to large estates, beginning at $12.92 million at time of writing. And the probate process can take some time, but it typically is only lengthy and complex for particularly large or contentious estates. If you have an ordinary scope of assets, the odds are good that neither taxes nor probate will be a burden for your heirs.

Yet, at the same time, wills are one-shot instruments. This makes good for making simple distributions and leaving direct instructions. But once the terms of the will have been carried out, the estate is closed.

The result is that wills are often a good choice when you want to leave someone an asset in its entirety, such as leaving an amount of cash or a home to one single heir. They are also good for small and mid-sized estates, as a trust would impose additional costs and complications in order to solve tax and probate issues that these estates likely will not have. Finally, wills are good for leaving instructions beyond the scope of assets, such as arranging for the care of minor children and pets.

Trusts – Good for larger estates, ongoing wishes and contestation

In general, trusts have the benefit of third-party management.

When you put money into a trust you legally hand it over to a third party. This creates costs and complications that a will does not have. The trust will require instructions and terms, and you will need to pay for a trustee to oversee the trust’s assets.

This same process, however, means that your estate moves out of your name. You can do this before death, through a living trust, after death, through a testamentary trust, or in totality, through what is known as a pour-over will. This last is a will which bequeaths all of your property to a trust, so there is no risk of accidentally leaving any assets to the probate process.

Moving assets out of your name makes trusts good for estates that are large enough to trigger tax and probate concerns, such as if your estate is worth more than $13 million at time of writing. They are also good for people who want to leave ongoing instructions after they die, for example, if you would like to ensure that a piece of property remains in the family without being sold. Finally, trusts are good for people who anticipate contested issues, as the trust will avoid the probate process that opens the door for heirs and debtors to challenge the estate.

When you’re trying to decide whether to leave assets in a will or a trust, a good rule of thumb is this:

Wills are a good choice when you have a simple transfer to make. If you want to leave someone money or property to own outright, and you are not a multimillionaire, a will may be your best option. Trusts are a good choice when you have a large or complex issue of inheritance. If your estate is worth several million dollars, or you want to ensure that your assets are transferred and managed in a specific way, a trust may be your best option.

Bottom Line

A will cannot override the terms of an existing trust. Once assets belong to a trust, they are not part of your estate and your will has no authority over them. However, if your will has terms to put assets into a trust, internal contradictions can prevent that transfer from taking place.

Estate Planning Tips

  • Depending on your estate and your wishes, writing your will can be a complicated process. Make sure you take the time to educate yourself about the intricacies of the process before you get started.
  • A financial advisor can help you with estate planning. Finding a financial advisor doesn’t need to be hard.  SmartAsset’s free tool matches you with up to three vetted financial advisors in your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

Photo credit: ©iStock.com/courtneyk, ©iStock.com/monkeybusinessimages, ©iStock.com/fizkes

Eric Reed
Eric Reed is a freelance journalist who specializes in economics, policy and global issues, with substantial coverage of finance and personal finance. He has contributed to outlets including The Street, CNBC, Glassdoor and Consumer Reports. Eric’s work focuses on the human impact of abstract issues, emphasizing analytical journalism that helps readers more fully understand their world and their money. He has reported from more than a dozen countries, with datelines that include Sao Paolo, Brazil; Phnom Penh, Cambodia; and Athens, Greece. A former attorney, before becoming a journalist Eric worked in securities litigation and white collar criminal defense with a pro bono specialty in human trafficking issues. He graduated from the University of Michigan Law School and can be found any given Saturday in the fall cheering on his Wolverines.

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Wills are an essential part of estate planning, leaving instructions for how to distribute your assets and possessions after you die. Trusts are a common tool in estate planning as well, serving as a way to manage assets both before and after your death. If your will conflicts with a trust that you have set up, the trust will typically prevail. This is because, in most cases, the assets in a trust don’t technically belong to your estate any longer. They are legally owned by the trust itself, so the terms of your will don’t affect them. For help with estate planning, consider working with a financial advisor.

Will Definition

A last will and testament is a legal document that directs how to distribute your assets after your death. Among other issues, a will establishes:

  • Who will take possession of your cash, investments, belongings and other property
  • How to pay any remaining debts or obligations
  • Any long term or ongoing plans that you would like to make
  • The care and distribution of any real estate you own

Wills are an essential part of estate planning. When you die, everything that you own is collectively known as your estate, which then gets distributed among your heirs.

If you leave a will, your estate is distributed according to your wishes and that process is overseen by someone you select, known as the executor. If you die without a will, known as dying intestate, your estate is distributed according to the inheritance law of your jurisdiction. That process is overseen by someone appointed by the probate court, known as an administrator.

Under typical circumstances a will is managed through and by probate courts. Your executor will file your will with the court which in turn oversees the entire process of settling your affairs and distributing the estate’s assets. For most estates, the probate process is largely a formality. The court makes sure that your will is legal, that your estate pays its debts and that your executor has the access they need to distribute your assets.

The same process occurs if you die without a will. In that case, the probate court appoints an administrator and the court then ensures that the administrator distributes your assets according to the local inheritance laws.

Trust Definition

A trust is a legal entity created to hold, manage and oversee property. Every trust has four main components:

  • Contributor – The person who created the trust and contributed assets to it
  • Assets – The cash, property and other assets owned by the trust
  • Trustee – The individual or firm that manages the trust’s assets
  • Beneficiary – The person or persons who receive assets from the trust

When you create a trust, you put assets in its name. Once you do that the assets belong to the trust itself, not you. This is the same as with any other property transfer. The trust is a legal entity capable of owning assets, paying taxes and making distributions, so once you put something in its name that property legally belongs to the trust itself, not you.

In creating a trust, you also establish its terms. You name the trustees and the beneficiaries, and set out the terms for how the trustees should manage the trust and its assets. This includes instructions for what assets the beneficiaries will receive, along with how and when. For instance, you can leave instructions for your trustee to distribute your funds equally among your children after you die.

Can a Will Override a Trust?

There are two main circumstances in which a will can conflict with a trust. First, a will might give instructions that conflict with the terms of a trust that already exists. For example, your will might include language that leaves the family home to your children, while earlier in life you placed that house in a trust for tax purposes. Second, a will might give instructions that conflict with the terms of a trust that doesn’t exist yet, or which hasn’t yet received its assets. For example, your will might include language that distributes your investments among your children, while another section of the will might include language that places your investments in a family trust.

In the first case, the terms of the will have no authority. A will cannot override a trust that already exists, nor can it distribute or manage property already held in an existing trust. If a trust exists and holds its assets, those assets belong to the trust itself. They are not part of your estate and, as a result, are not subject to the terms of your will.

If your will gives instructions that conflict with the terms of a trust, your will’s terms will apply to the assets in your estate and the trust’s instructions will apply to the assets in the trust. The designated beneficiaries will receive their assets according to the terms of the trust.

In the second case, your will is not actually conflicting with any existing trust. Instead, it is internally contradictory and will be resolved according to local inheritance law. You can leave instructions in your will to put assets in trust. This can apply to a trust that already exists, where your will puts assets into a trust that you created earlier. It can also apply to a testamentary trust, where your will instructs the executor to create a new trust and put assets into it.

In both cases, these assets belong to your estate when you die. This means that the terms of your will govern how those assets are distributed. If one section of your will conflicts with the section of your will which creates or contributes to the trust, then the issue is that your will is internally contradictory. The trust itself is not in question, just the will.

In that case the probate court and your executor will have to determine the exact nature of the internal conflict in your will. They will then resolve that conflict according to state and local inheritance law.

Your will still cannot supersede how an existing trust manages its assets. But conflicts in your will can prevent new assets from being added to the trust. This is why, if you plan on making or managing a trust, it’s wise to have a lawyer help you write these documents.

When Should You Use a Will vs. a Trust?

Wills and trusts are, generally, the two most significant vehicles for estate planning. Broadly speaking, if you are looking to leave assets to your heirs, you will likely use one or both of these. While a full exploration of the subject is beyond the scope of this article, there are some good rules for when you should use a will vs. a trust. Wills and trusts are not mutually exclusive; their control over specific property is. Any given asset can either be put in trust or distributed by a will – but not both. However, you can manage your estate in general by putting some assets into a trust and distributing others through a will.

Wills – Good for mid-sized estates, simple transfers and instructions

In general, wills have the benefit of simplicity.

While wills do not have the tax and probate benefits of a trust, the truth is that these concerns are frequently overstated. The federal estate tax only applies to large estates, beginning at $12.92 million at time of writing. And the probate process can take some time, but it typically is only lengthy and complex for particularly large or contentious estates. If you have an ordinary scope of assets, the odds are good that neither taxes nor probate will be a burden for your heirs.

Yet, at the same time, wills are one-shot instruments. This makes good for making simple distributions and leaving direct instructions. But once the terms of the will have been carried out, the estate is closed.

The result is that wills are often a good choice when you want to leave someone an asset in its entirety, such as leaving an amount of cash or a home to one single heir. They are also good for small and mid-sized estates, as a trust would impose additional costs and complications in order to solve tax and probate issues that these estates likely will not have. Finally, wills are good for leaving instructions beyond the scope of assets, such as arranging for the care of minor children and pets.

Trusts – Good for larger estates, ongoing wishes and contestation

In general, trusts have the benefit of third-party management.

When you put money into a trust you legally hand it over to a third party. This creates costs and complications that a will does not have. The trust will require instructions and terms, and you will need to pay for a trustee to oversee the trust’s assets.

This same process, however, means that your estate moves out of your name. You can do this before death, through a living trust, after death, through a testamentary trust, or in totality, through what is known as a pour-over will. This last is a will which bequeaths all of your property to a trust, so there is no risk of accidentally leaving any assets to the probate process.

Moving assets out of your name makes trusts good for estates that are large enough to trigger tax and probate concerns, such as if your estate is worth more than $13 million at time of writing. They are also good for people who want to leave ongoing instructions after they die, for example, if you would like to ensure that a piece of property remains in the family without being sold. Finally, trusts are good for people who anticipate contested issues, as the trust will avoid the probate process that opens the door for heirs and debtors to challenge the estate.

When you’re trying to decide whether to leave assets in a will or a trust, a good rule of thumb is this:

Wills are a good choice when you have a simple transfer to make. If you want to leave someone money or property to own outright, and you are not a multimillionaire, a will may be your best option. Trusts are a good choice when you have a large or complex issue of inheritance. If your estate is worth several million dollars, or you want to ensure that your assets are transferred and managed in a specific way, a trust may be your best option.

Bottom Line

A will cannot override the terms of an existing trust. Once assets belong to a trust, they are not part of your estate and your will has no authority over them. However, if your will has terms to put assets into a trust, internal contradictions can prevent that transfer from taking place.

Estate Planning Tips

  • Depending on your estate and your wishes, writing your will can be a complicated process. Make sure you take the time to educate yourself about the intricacies of the process before you get started.
  • A financial advisor can help you with estate planning. Finding a financial advisor doesn’t need to be hard.  SmartAsset’s free tool matches you with up to three vetted financial advisors in your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

Photo credit: ©iStock.com/courtneyk, ©iStock.com/monkeybusinessimages, ©iStock.com/fizkes

Eric Reed
Eric Reed is a freelance journalist who specializes in economics, policy and global issues, with substantial coverage of finance and personal finance. He has contributed to outlets including The Street, CNBC, Glassdoor and Consumer Reports. Eric’s work focuses on the human impact of abstract issues, emphasizing analytical journalism that helps readers more fully understand their world and their money. He has reported from more than a dozen countries, with datelines that include Sao Paolo, Brazil; Phnom Penh, Cambodia; and Athens, Greece. A former attorney, before becoming a journalist Eric worked in securities litigation and white collar criminal defense with a pro bono specialty in human trafficking issues. He graduated from the University of Michigan Law School and can be found any given Saturday in the fall cheering on his Wolverines.

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How to File for Student Loan Bankruptcy – MintLife Blog

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credit score significantly. Depending if you file for chapter 7 or chapter 13, bankruptcy will stay on your credit report for seven to 10 years. You should also be aware that when you file for bankruptcy, all of your financial information becomes available to the public. The court may also decide on how and when you can spend your money, as well as who you must repay first.

Something else that you can try instead of filing for bankruptcy is checking if you are eligible for an income-driven repayment plan. This allows you to repay your student loan debt at an affordable monthly rate based on your income. Another option is to see if you are eligible for a forbearance. A forbearance puts a temporary hold on your loan payments if you are approved. To get approved you must show that you have some kind of outstanding medical expense or financial obligation. You can also get approved for military or AmeriCorps service. One thing to consider with a forbearance is that your loans still build interest when you don’t pay them.

Next, you can check to see if you meet the requirements for Public Student Loan Forgiveness (PSLF). To qualify you must have made at least 120 qualifying monthly loan payments under a qualified plan while working full-time for a qualified employer.

Some last things to consider before you decide to file are the costs and time it takes to get your loans discharged. Getting student loans discharged is very uncommon, so you will want to be certain you will qualify before you try. If you plan on filing, you should be ready for filing fees and attorney fees — attorney fees average over $1,400 and filing fees are typically around $300. This can be a lot, especially for someone who is looking to file for bankruptcy. That is why it is important to fully understand where you stand with your finances. Many people do not realize what it costs to file for bankruptcy. For some people this is a burden that damages their finances even more. This is why you must be certain that you can do things like pay your rent and buy groceries after filing. If this is too much, then you might want to consider other options.

How to Demonstrate Undue Hardship

Proving that your student loans will cause you undue hardship is not an easy task. You will have to demonstrate that paying back your student loans will cause a significant negative effect on you and those who depend on you.

There is no set way to determine or ask someone to demonstrate undue hardship. Courts have the discretion of what methods they use to determine your hardships. A common method used by many courts to prove undue hardship is the Brunner test. To prove undue hardship, you must meet all three factors of the test:

  • Poverty – You can’t afford to pay your loans with your present earnings and spendings, and maintain a minimal standard of living afterwards.
  • Persistence – Your present financial struggles will carry on for a considerable amount of time while you repay your loans.
  • Good Faith – You have made efforts in good faith to repay your loans and arranged for an affordable payment plan

Some courts use a different method of testing for undue hardship known as the Totality of Circumstances Test. For this test the court will review all of your applicable financial assets, future earnings, and expenses. Based on what they find they might rule for undue hardship. This test is different from others because it looks at all aspects that could have an effect on the person, rather than just one or two factors.

Filing for Student Loan Bankruptcy

Discharging your loans comes at the end of bankruptcy, and you might run into some tough questions along the way. There are a few things you can do to help you understand and complete the process.

1. Talk to a Financial Advisor or Lawyer

As mentioned, getting your loans discharged can be very challenging, especially for someone who is unfamiliar with the process. This is why you will want to seek assistance from a bankruptcy lawyer who is practiced and has been in these situations before. Their professional knowledge will be very useful when it comes to filling out the correct forms and procedures.

2. File for the Correct Type of Bankruptcy

When you try to discharge your student loans, you will first have to file for bankruptcy for either chapter 7 or chapter 13. Chapter 7 might discharge your loans if they deem you unable to pay because of undue hardship. Chapter 13 bankruptcy will not get rid of your loans, rather restructure the payments so they are affordable.

Chapter 7

  • You must show the court that you cannot afford the cost of your loans.
  • If you are eligible, all loans can be cleared and you will no longer be personally liable.
  • You must meet with and be questioned by your appointed trustee and creditors.
  • This process can take 4 to 6 months, but can completely discharge your loans.

Chapter 13

  • You can prove that you can repay some of your debts, but finishing your current payments will cause undue hardship.
  • Rather than being discharged, loans are restructured. You will hold onto assets and debts will be discharged after the case.
  • You must create a payment plan for the court and all creditors to view.
  • Payment plans can take 3 to 5 years.

3. Start the Adversary Process

An adversary proceeding is a lawsuit filed in bankruptcy and basically means that you are making a complaint in court. This is required for bankruptcy because your complaint is your inability to pay your student loans. When you file this proceeding you will need to have proof that you cannot make your loan payments due to undue hardships. This means verifying your income and proving that dependents rely on you, making it impossible to pay your loans.

So can you file for bankruptcy on student loans? The answer is yes, but you should look into other options first and establish an affordable payment plan. Now that you know what it takes to discharge your student loans this way, and you understand the difficulty and costs that come with proving undue hardship, you can take your next steps. Use a debt-to-income ratio tool to help you plan your payments by determining your ability to afford and pay a loan.

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By Peter Anderson 2 Comments – The content of this website often contains affiliate links and I may be compensated if you buy through those links (at no cost to you!). Learn more about how we make money. Last edited April 17, 2013.

If you’re leaving a job that you’ve been at for a while it can be tough to think about much else beyond trying to find a new job, or getting acclimated to your new one. There are resumes to brush up on, skill sets to improve and connections to make.

There are other things that you need to think about beyond a new job, however, that are important as well. Things like doing a 401k rollover from your old job’s plan to an IRA you’ve set up on your own.

So where do you start?

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What Are Your 401(k) Options When Leaving A Job

When you’re leaving a job, you have several different options of what to do when it comes to your 401(k).

  • Leave it in the current plan:  You can just leave your 401(k) where it is and not touch it.  If you’ve got a great plan that has good low cost investments and low fees, you may want to consider doing this.  The thing is, usually you can do better to moving to your own IRA through a discount brokerage or mutual fund company.
  • Cash it out: You can choose to cash out your 401(k) plan when you leave the job.  Honestly though I think this is an awful idea because if you’re not 59 1/2, you’ll be subject to a 10% early withdrawal penalty, along with your current combined state and federal tax rates.  Assuming you have a combined rate of 35%, and a penalty of 10%, you’re only going to be left with 55% of your money.  If you had $100,000 in the account, you’ll be left with $55,000 after penalties and taxes.  Don’t lose out on all that money just by withdrawing it early.
  • Roll it over to an IRA:  Rolling over your 401(k) to an IRA that you’ve set up at an external brokerage or company like Vanguard is probably the best option.  It will allow you to have access to more and better funds, lower costs and more control.
  • Roll over to a new 401(k):  If you already have a new job and 401(k), you may want to consider rolling the funds over if it’s a good plan. Typically you can do better rolling to an IRA, however.

So when it comes down to it, my suggestion is to roll the funds over to your own IRA at a company like Vanguard, or a discount brokerage.

Reasons To Rollover Your 401(k) To An IRA

There are a variety of reasons why you may want to rollover your 401(k) to your own IRA once you’ve left your old job. Here are a couple of the biggest:

  • Better investment options in an IRA: When you invest in your company sponsored 401(k) the plan that they have set up may not have that many investment options, or the ones that they do may not be the greatest.  Many only offer one index fund, something like a S&P 500 index fund, and a few other low cost options.  Rolling over your funds will give you more investment options in order to maximize your returns.
  • Lower fees in an IRA:  Quite often a 401(k) through your company will have a bunch of pre-selected mutual funds that don’t have very good expense ratios. On top of that the plan may have an annual management fee or other miscellaneous fees.   By moving to your own IRA you can select low cost mutual funds and index funds that will allow you to cut down on expenses.

It should be stated that there area  few situations where you may not want to rollover your 401(k), but I won’t go over those here as they’re few and far between. Situations like if you’re retiring early, planning a roth conversion, or situations where you’re dealing with a large amount of company stock.

How To Rollover Your 401(k)

When you’ve decided to rollover your 401(k) to an IRA, there are a few steps you’ll need to go through.

  1. Open an Individual Retirement Account (IRA):  If you haven’t already, open an IRA at a discount brokerage, or mutual fund company.  Here’s a post looking at how to choose a IRA custodian.
  2. Contact your old 401(k) provider, get forms:   You’ll want to contact the provider of your old 401(k) to verify that you don’t have any limitations on rolling over funds.  Then request the forms you’ll need in order to initiate the process.  Make sure to ask what information you’ll need from your new IRA plan.
  3. Contact your new IRA provider, verify account setup:  You’ll want to talk to your  new plan administrator, whether it is a discount brokerage or company like Vanguard, and verify that your account is ready to receive transferred funds.  Next, verify any information that you need for the old 401(k)’s transfer forms.
  4. Fill out the forms, verify direct rollover of funds:  When you have the forms, make sure that they are completely and correctly filled out to ensure no costly mistakes.  Make sure that you’re asking for a trustee-to-trustee transfer or direct rollover of the funds.  Have them send the check directly to your new IRA company.  If your old company does an indirect rollover and cuts a check for the balance of your 401(k) in your name they will withhold 20% for taxes.  You are then required to deposit the total amount of your balance (before 20% was deducted) into your new 401(k), or you could be subject to taxes and a 10% penalty for the amount under your total balance – a penalty for early withdrawal. For example, if you have $100,000 being rolled over, in an indirect rollover the company would cut a check for $80,000 and withhold $20,000 for taxes.  Then you are required to take the $80,000 plus $20,000 of your own money and deposit it at your new IRA within 60 days, or be subject to taxes and penalties.  The extra 20k that was withheld for federal taxes will be returned when you file your return as long as you deposit all 100k in your new plan.

401(k) To IRA Rollover Conclusion

Leaving an old job can be stressful, and sometimes it can be a pain to try and roll over on old 401(k) – but it’s an important thing to investigate.

Typically your best bet is going to be either to roll your funds over to an IRA with a discount brokerage or mutual fund company, and to do a direct rollover of funds so you don’t have hairy tax situations to mess with.  There are other options to take, so make sure to investigate it for your own situation and proceed down the best path for you.

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A payable on death account or POD account allows you to transfer money to someone else when you pass away without requiring those assets to go through probate. The individual or entity who collects those assets is called a POD beneficiary.

What does POD mean in banking? Broadly speaking, there are a number of deposit accounts that can be deemed payable on death, including checking and savings accounts.

If you’re considering establishing one of these accounts, it’s important to understand how POD accounts work, and if you are a beneficiary, it’s also helpful to know when and how you’re entitled to withdraw money from a payable on death bank account. Read on to learn:

•   What does POD mean in banking?

•   What are POD bank account rules?

•   What are the pros and cons of POD accounts?

Payable on Death Accounts Explained

A payable on death account pays out assets to a beneficiary when the account owner passes away. You may also hear POD accounts referred to by other names, including:

•   Totten trust

•   Tentative trust

•   In trust for account

•   Revocable bank account trust

•   Informal trust

When you create a payable on death account you can decide how many beneficiaries to add and who to name.
Examples of POD beneficiaries can include:

•   Adult children

•   Siblings

•   A non-profit

•   A trust

Worth noting: If you co-own the account with someone else, they cannot be named as a POD beneficiary.

Payable on Death Rules

Payable on death accounts have certain rules that set them apart from other accounts. The most significant rule concerns when beneficiaries can access the money in the account. Here are some details to know:

•   If you open a POD bank account, you have full control over the money in the account during your lifetime. Even if you name 10 beneficiaries to the account, those beneficiaries cannot lay claim to any of the funds in it until you’ve passed away.

•   In terms of how the money in a payable on death bank account is divided, each beneficiary receives an equal share. So if you have $100,000 in a savings account when you pass away and that account has four POD beneficiaries, each one would receive $25,000.

•   Note that state law may limit the number of beneficiaries you can name to a payable on death account. Your depository institution may have additional rules for POD accounts.

Types of Accounts That Can Be Payable on Death

There are a number of account types that can be established as POD accounts. Your options can include:

•   Checking accounts

•   Savings accounts

•   Certificate of deposit (CD) accounts

•   Individual Retirement Accounts (IRAs)

•   Investment accounts

You can make a bank account that you own by yourself or with someone else a POD account, though again note that the co-owner could not be listed as a POD beneficiary.

In terms of what accounts cannot be POD, the list includes small business and commercial bank accounts as well as safety deposit boxes.

Credit accounts are not POD accounts either, since there are no assets to leave behind. In terms of what happens to credit card debt when you die, it can become the responsibility of your spouse or your estate, depending on where you live.

Recommended: Why It’s So Hard to Save Money Today

Payable on Death vs Beneficiary

Payable on death refers to a specific type of financial account that’s used to pass assets to someone else. The term “beneficiary,” however, is used to refer to an individual or entity that’s entitled to inherit assets from someone else. POD beneficiaries fall under the larger beneficiary umbrella.

Similarities

Here are some ways in which POD accounts and beneficiaries are the same. When you name a payable on death beneficiary, you’re telling your bank that you want that person or entity to receive money from the account when you pass away. In a sense, that’s no different from naming a beneficiary to a 401(k) plan or a life insurance policy. Your life insurance beneficiary, for example, is entitled to receive a life insurance death benefit from the policy when you die.

Payable on death beneficiaries and life insurance or retirement plan beneficiaries are not entitled to any money during your lifetime. They can’t access your bank account, withdraw money from your 401(k), or cash in your life insurance. But they all stand to benefit financially from your passing in some way.

Additionally, assets that have a named beneficiary are not subject to probate. So, if you open a Roth IRA and name your spouse as the beneficiary, they’d have access to the money in the account when you pass away. The same is true with regard to life insurance.

Differences

The main difference between payable on death accounts and other beneficiary accounts lies in what’s being passed on. With POD accounts, you’re typically talking about bank accounts. So you might leave your checking account or savings account to your children after you’re gone.

As mentioned, you can name beneficiaries for other types of assets such as a 401(k), IRA, investment account, or life insurance policy.

There can also be differences between payable on death accounts and other beneficiary accounts with regard to taxation. Someone who inherits a POD account may owe estate taxes, for instance, whereas life insurance proceeds are typically income and estate tax-free. (Determining how to allocate one’s funds and the tax burden that will result can be an important part of estate planning.)

Recommended: Tips to Improve Your Money Mindset

Pros and Cons of POD Accounts

Payable on death accounts can offer advantages and disadvantages. It’s helpful to weigh both sides before opening one.

Here’s an overview of the main pros and cons of POD accounts.

Benefits Drawbacks
You retain control of the account and the assets in it during your lifetime. Beneficiaries would not be able to access funds if you were to become incapacitated.
Payable on death accounts are not subject to the probate process. Your bank may require you to close a POD account in order to choose a new beneficiary.
Depending on state law, you may be able to name multiple beneficiaries. State law may restrict the number of POD beneficiaries you can name.
Removing POD accounts from probate can allow beneficiaries to access funds quicker. It can be complicated for estate executors to access funds to settle a larger estate using POD deposits.

Payable on Death Account vs Trust

A POD bank account differs from a trust in a couple of key ways.

•   In a typical trust arrangement, the trust creator or grantor transfers assets to the control of a trustee. The trustee manages those assets on behalf of one or more named beneficiaries. Assets held in trust are not subject to probate when the trust grantor passes away.

Probate is a legal process in which someone’s assets are inventoried, outstanding debts are paid, and remaining assets are distributed according to the terms of the decedent’s will. Dying without a will in place means assets would be distributed according to state inheritance laws.

•   In a Totten trust or POD bank account, there’s no trustee. However, by designating an account as payable on death you can still remove the assets in the account from probate. That’s an advantage, as probate can be both lengthy and time-consuming.

The Takeaway

You might consider a payable on death account if you’d like to pass assets on to loved ones with minimal fuss. That could be helpful if you’d like to make sure they have easy access to cash to cover funeral and burial expenses or any basic living expenses after you’re gone.

Regardless of whether you opt for a POD account or not, choosing the right bank matters. With a SoFi Checking and Savings account, you’ll spend and save in one convenient place. You’ll earn a competitive annual percentage yield (APY) and pay no account fees, which can help your money grow faster.

Better banking is here with up to 4.20% APY on SoFi Checking and Savings.

FAQ

What does payable on death mean?

Payable on death means that money in account is payable to one or more beneficiaries when the original account owner passes away. A payable on death bank account allows beneficiaries to receive funds without having to go through the probate process.

Is a POD on a bank account a good idea?

Adding POD beneficiaries to a bank account could be a good idea if you’d like to make sure the money in the account goes to whom you want it to after you pass away. You could also choose to set up a payable on death bank account simply to allow those assets to bypass the probate process after you’re gone.

What is the difference between a pay on death and a beneficiary?

Payable on death is a designation that applies to bank accounts and other financial accounts. A beneficiary is someone who’s named to receive money from a bank account, retirement account, or other asset, such as a life insurance policy. A POD account can have one or more beneficiary designations.

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Last Updated on March 29, 2023 by Mark Ferguson

Driving for dollars is a term that real estate investors use to describe a technique for finding great deals on houses. You drive around until you find a house that looks vacant or distressed and then attempt to buy that home from the owners. Driving around looking for houses is simple, but the process of buying the home can be very complicated. It is not easy to find the owners of a vacant house. If the house is bank-owned it is virtually impossible to buy it and many owners do not want to be bothered.

How does driving for dollars work?

There are a few ways to drive for dollars and I use a couple of techniques myself. The first is to target a specific neighborhood where you want to buy houses. I have targeted neighborhoods where I own rentals and that typically have great rent to value ratios. I do not like to buy the cheapest houses for my rentals, but the more expensive houses are, the less cash flow they usually have. My rentals tend to be valued just below the median sales price in my area.

I have also targeted neighborhoods for fix and flips. I drove down every street in a neighborhood where prices had risen significantly, but there were many older homes. I looked for homes that appeared vacant and not well maintained. Houses that are not maintained indicate the owner does not care about the house, is short on money, or has given up. One of the best ways to make money flipping is to add value by repairing a house.

I also keep my eyes open wherever I drive. I drive a lot as a real estate agent and real estate investor. I am always looking at houses, and while I am driving to those houses, I look for vacant houses or homes that need work. I also look out for FSBOs (For Sale by Owner) homes. Since I am a real estate agent, I can approach For Sale by Owner sellers and offer to list their home or buy it if the price is right.

Below you can see a video of me driving for dollars
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What do you do once you find a house that needs work?

Once I find a house that is a possible deal, I write down the address and research it more when I get back to the office. I look in public records to see who the owners are and if they are investors or owner-occupants. My strategy varies based on who the owners are.

Owner-occupants

If the people who own the house are living in it, I usually send them a letter saying I am buying homes in the area and would love to buy their house. To be honest, I could do much more than this, but I do not have time. If I were super serious about buying a house, I would walk up to the door and try to talk to the owners in person.

Investor owner

If the occupants are tenants, it will not do any good to talk to them. I want to talk to the owner, and if they are an investor, I have to find out where they live. Public records may give an address, but it may not be current. I send a letter to the owners again, but if I really want a house, I do my best to find their phone number and call them.

This company created an awesome app that helps you find and contact the owners of distressed houses.

What do you do when you find a vacant house?

When houses are vacant, there is a little more work involved in finding the owners. In some cases, it is not even worth pursuing the owners, unless you want to waste hours of time and become extremely frustrated!

If the house is vacant, I try to find an address through public records if the owner is still a person or a corporation. Finding owners of vacant houses is not easy to do. Many times, the only address available is the address for the vacant home. There are a couple of ways to find people when you do not have an address. You can search for them on Google and you might find some information on them. You can search for them on social media sites such as:

If you cannot find them on social media, you can try an online people search service or even hire a private investigator. I have been successful in finding many people using these techniques. When the foreclosure process was different in Colorado, we could redeem houses from the Public Trustee using Quit Claim Deeds from the owners of a house. We would find the owners, pay them for the Deed, and then redeem as the owners of the property after the foreclosure. The great thing about doing this was it usually wiped out all the liens and second mortgages once the home foreclosed. However, Colorado changed the laws a few years ago and this is no longer an option. The owner has to redeem the house prior to the foreclosure now.

What do you do if the house is bank-owned?

Many people ask how to contact a bank who owns a home that is not listed so they can buy it. The bad news is that in today’s market it is virtually impossible to buy a bank-owned home before it is listed. All the major banks have very strict procedures for selling houses, which includes using a real estate agent to list the homes on the MLS. The banks have to get the most money for the houses they can for their shareholders and investors. Many times, mortgage insurance is involved and the mortgage insurance company has to sign off on any sales as well. If a house sells without being listed on MLS, it is more likely to sell for much less than it is worth.

If you see a vacant bank-owned home, especially one owned by a big bank, you are wasting your time trying to buy it before it is listed. You can try to contact the bank, but here is how the process goes.

  • You call the bank and ask whom to talk to about foreclosures.
  • The bank tells you to call their corporate office and ask them who to talk to because they do not know.
  • The corporate office will send you to about 10 different extensions and no one has a clue what department to send you to.
  • After a few hours of calling people, you might make it to the right department. It might be the foreclosure department, the REO department, or something else. All banks have different names and do not encourage calls to these departments.
  • Once you are finally able to talk to someone who knows what you are asking, that person will tell you that you have to wait until the house is listed.

The only way it is possible to buy a home from a bank before it is listed is with a local bank. In some rare cases, local banks may sell properties to investors before they are listed.

What if the owner of the home owes more than it is worth?

You may find a homeowner who wants to sell but they owe too much to make the sale worth it. It is possible to do a short sale, but you must be very careful! Short sale fraud is the most investigated crime by the FBI right now and you do not want to be investigated by the FBI. I actually tried to get an interview with the FBI regarding short sale fraud last year but was unable to get one set up. The tough part about short sale fraud is there are no clear guidelines. Here are some things to avoid if possible, which make it tough to buy off-market properties as short sales. Short sale fraud is anything that defrauds the bank of money through deceitful tactics.

  • Almost all banks require short sales to be listed on MLS in order for them to get the best offer. If a home is not listed in the MLS and the bank is told that it is, that could be short sale fraud. If the home is listed in MLS, then immediately listed as under contract and other buyers are not allowed to make offers, that could be short sale fraud as well.
  • Most banks will not allow related parties or friends to sell a short sale to each other. If you buy a short sale from your brother or friend without disclosing to the bank, it could be short sale fraud.
  • Anything that goes against what the bank specifically says must happen in writing could be considered short sale fraud if the bank is not notified.

I see short sales sold all the time that could be considered fraud that the sellers and buyers most likely get away with. However, you should be very careful when doing a short sale deal that is not listed on the MLS. I buy short sales all the time, but I do not buy short sales where I find the buyer myself. The short sales I buy are always listed on MLS with another real estate agent.

Conclusion

Driving for dollars can be a great way to find deals, but it can take a lot of time and effort before you actually find a deal. I used to spend much more time going after sellers of houses that were not listed, but in the end, the time it took versus the results discouraged me. To be successful at finding off-market deals you have to dedicate a lot of time and know that for every 50 houses you find, one might be willing to sell at a price that makes sense.

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Source: investfourmore.com