Author Topic: EstatePlanning for P2P Accounts  (Read 760 times)

neals384

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EstatePlanning for P2P Accounts
« on: March 06, 2020, 11:26:27 AM »
How have P2P investors handled their P2P accounts in their estate plans?  We are currently updating ours and would appreciate ideas!

In the simplest scenario, suppose a joint account at LC or Prosper, but only one spouse is interested in peer-to-peer investing, and the other is perhaps not really computer savvy at all.  When the P2P investor spouse (that's me, of course) passes away, the remaining spouse inherits the account, and assuming she doesn't really want to be a P2P investor, she has a few issues:
     Canceling auto invest, API or 3rd party investments in new loans
     Transferring cash elsewhere as it accumulates from interest and payoffs.
     Dealing with P2P taxes.
Unless she can sell notes via folio (LC only), there will be a time lag of 3 to 5 years when the account can't be closed. 
(If the account was an IRA, then the tax problem is solved but $ transfers are taxable (or to other IRAs).

Now consider a tougher scenario - unmarried person as the P2P investor, with, say 5 beneficiaries.  First, you have the same issues as with a spouse - does each beneficiary really want to be a P2P investor?  Second, do Prosper/LC have a process for splitting a P2P account? 

For an after tax account, Prosper does not even have a way to name a beneficiary, so it's probably best to use a trust account there.  Your general estate plan may call for distribution of all trust/estate assets to the beneficiaries asap, but is that even possible, or does the trust take 3-5 years to wind down (as successor trustee fees accumulate)?

For IRA accounts, you can name multiple beneficiaries at the IRA custodian, but what happens when the custodian tells LC/Prosper to split the account five ways?

Maybe the best estate plan is to start winding down my P2P accounts 3-5 years before I die?  Thanks in advance some help on this as you can see I pretty confused!

Neal
     
   



jheizer

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Re: EstatePlanning for P2P Accounts
« Reply #1 on: March 06, 2020, 02:34:06 PM »
For the simplest scenario, I showed my wife how to log into LC and refresh the API token.  That way all future investing from my app at the time was halted.  From there I just said transfer cash out as it accumulated.  No IRA or anything else in my case to have to worry about.
Replacement to P2P Quant's Percentile Tool http://lc.geekminute.com

Rob L

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Re: EstatePlanning for P2P Accounts
« Reply #2 on: March 07, 2020, 11:07:51 AM »
How have P2P investors handled their P2P accounts in their estate plans?  We are currently updating ours and would appreciate ideas!

Thought I'd second your concerns as they were my own until I was able to close my LC and Prosper accounts.

Back when I started closing them I had a non-trivial investment and was 67 years old. Between the fraud at LC in 2016 and Prosper dropping Folio without warning I had enough reason to stop investing. Given my age, estate planning was the final nail in the coffin so to speak :). If I passed before my wife she could have inherited the accounts and let them run off, but what to do if they later passed from her to one or more children. What a mess. We have a joint living trust that should have (but didn't) deal specifically with this. We just took the chance that one of us would outlive the accounts. Not much of a plan.

For most folks I don't think there are any reasonable and comprehensive answers. All the planning problems you point out are valid concerns.
Sorry I couldn't have been more helpful but I strongly agree it is an important and difficult matter.
My choice was to cut and run and simplify the life of my heirs. At some age this is probably the best choice for many.

neals384

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Re: EstatePlanning for P2P Accounts
« Reply #3 on: March 10, 2020, 12:38:00 PM »
Thank you both for replying.  I was hoping there was some magic solution but maybe not!  Given economy downturn due to Covid-19, not sure I should be making new P2P loans anyway!