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To name a beneficiary on CDs or not? Tax implications?

Mccleary, WA |

Most my money is tied up in CDs. I have few possessions and a simple will which of course will have to go through probate. Most my money is tied up in CDs. I don't want my beneficiaries to end up paying a lot in taxes, but I also don't want them to have to pay huge attorney fees in order to process through probate. Is it better to NAME beneficiaries on the CDs or not? If I name them on the CDs, I assume they get the money right away. But do they have to pay taxes for this portion of inheritance? If I have DON'T name beneficiaries on the CDs, then I assume they end up as part of the Estate and go through the probate proceedure. Would this cause the attorney and courts and IRS to end up with the biggest chunk of money?

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Attorney answers 1


Unless your estate is worth more than $3.5 million, there will be no federal estate taxes on anything your heirs receive from you. I don't practice in Washington, so I don't know if there are state inheritance or estate taxes - you should ask a Washington estate planning lawyer or tax professional about that.

It is usually a HUGE mistake to a beneficiary's name to a CD or real estate (or anything else, for that matter). If the beneficiary is sued and loses, the winner could "satisfy the judgment" by taking what you thought was YOUR CD or real estate.

If you want your beneficiaries to avoid probate, you can name them as "pay on death" (POD) beneficiaries on the CD. That way, they have no rights to the CDs until you die - and the CDs do not go through probate.

This information is not intended to substitute for professional legal advice and does not create an attorney-client relationship. You should accept legal advice only from a licensed legal professional with whom you have an attorney-client relationship.