How to avoid probate and have child repay loan upon death
If a parent expects a child to repay a loan upon parent's death, that parent needs to put that in writing.
Rob: My mother in law is-- had got some bad news and she has a sizable inheritance that she took on from her parents. She has everything under beneficiary rights, in other words, her two daughters are half-and-half beneficiary on all of her IRAs, her bank accounts and what have you. We're just wondering if this is going to be substantial enough to bypass probate or is that going to cause an issue still?
Attorney Tom Olsen: Well, Rob, you are on the right track that you want to avoid probate when your mother in law passes away. The good news is that typically an IRA, retirement accounts, life insurance, annuities, anywhere we get to name beneficiaries you can assume that that asset is not going through probate. If she has IRAs and she's named her two daughters as the beneficiaries they're not going through probate, when she passes away she simply-- your wife simply shows the IRA company or death certificate they'll turn the money over to her. Rob, what about her bank accounts or checking, savings, CDs?
Rob: I'm sorry, you broke up a little bit. What did you say?
Attorney Tom Olsen: What about her bank accounts?
Rob: Yes, they're all a benefit-- my wife is actually on as a co-owner of the bank account so she will be the one that disperses that 50/50.
Attorney Tom Olsen: What about her home, real estate, Rob?
Rob: She owns it outright.
Attorney Tom Olsen: The mom does?
Attorney Tom Olsen: Okay, so the home is going to go through probate, Rob, so if we want to avoid probate on your home, we have a great tool for that called a Lady Bird Deed. Rob, I'd like for you to call my office next week and we can talk about doing a Lady Bird Deed for your mother in law.
Rob: Then I have a quick question and it's off the wall so if you can't answer it I understand. My sister in law has borrowed several thousands of dollars from my mother in law and she said that she would just take it out of what her inheritance is but I'm not sure that she's documented anything. Is there something that my wife who is concerned about this can do to make sure that that comes out of her portion of the inheritance?
Attorney Tom Olsen: Well, first of all, in my perfect world, mother in law would do some kind of writing saying, hey, my daughter Betty owes me $10,000 and I'd like for it to be deducted from her share. Nobody has to guess that this was mom's intention and this is the amount due. Now, Rob, you told me that your wife co-owns the bank account with mom, the other daughter is not a co-owner of those accounts. What that means is that when mom passes away, that money literally belongs to your wife. It is hers to do with as she pleases. She would not be obligated to split it up with her sister.
If your wife wants to say, okay, I will split it but I'm going to back out $10,000 first, hey, there's not a thing that the sister could do about it but to preserve family unity, I would-- that's why I really want mom to have something in writing saying that this money is owed and what the amount owed is.
Rob: All right. Thank you very much, appreciate it.
Attorney Tom Olsen: You're welcome, Rob. Feel free to have your mother in law come see me next week. We'd love to help her. Folks, we are all about helping people to avoid probate at the Olson Law Group in Orlando. We do offer a free initial counsel to talk to you about avoiding probate even if you've got an existing will or an existing trust, bring it with you. We'll go through it, we'll make sure that you are taking steps necessary to avoid probate. Call me attorney Tom Olson or Chris Merrill at the Olson Law Group in Orlando at 407-423-5561.