Titling of Personal Accounts Is Important!

As we have all heard, “By failing to plan, you are preparing to fail.”

Unless you properly plan, your estate will go through the probate process, a court-supervised proceeding that authenticates your Will (if you have one) and approves your named Executor to distribute your assets. The process can potentially be avoided with a solid estate plan. We have seen instances of probate costs to a surviving spouse reach $20,000 because an account was titled solely in the deceased spouse’s name; this could have been easily prevented using some of the suggestions below.

Avoiding probate doesn’t have to be complicated. One of the easiest methods is to ensure that accounts have either Transfer on Death (TOD) and/or Joint designations. These designations allow accounts to avoid probate, which can enable the surviving owner or beneficiaries to avoid the expense and time needed to go through that process.

Designations can simplify a part of your estate strategy. The way in which an account is titled is legally significant and can supersede your estate plan – which is why it is important to review your account designations to ensure that they will pass on according to your wishes.

Here are the most common account designations which you can use to avoid probate:

Individual accounts with a TOD designation. Choosing a beneficiary or beneficiaries sets up a transfer on death (TOD) registration for the account. TOD registration allows ownership of the account to be transferred to the designated beneficiary upon your death.

Joint Tenants with Right of Survivorship (JTWROS). This type of account will pass directly to the surviving account holder when the first account holder dies. Assets will pass to your heir right away if he or she is a joint holder, and a responsible joint holder can take over your affairs if you become incapacitated or impaired. JTWROS titling will supersede a will.

Joint Tenants in Common. This account designation is a good choice for shared accounts that will be subject to a will. While all the account holders are alive, the account is owned by the holders in proportion to the amount they contributed to the account. When one of the account holders dies, their interest will pass to whomever he or she has specified in their will or heirs as dictated by law if he doesn’t have an estate plan. The assets are considered owned equally among the number of common tenants on the account or property.

What about retirement accounts? When you open a retirement plan account such as an IRA or 401(k), you will be asked to name a beneficiary for the account. The beneficiary you name can claim the money directly from the account custodian.

Proper account designations offer significant benefits when simplifying estate planning. We encourage you to review accounts held with us, as well as any others held away from the firm.                        

As estate planning can be a complex topic, it is essential to seek the professional advice of your estate attorney and work with your investment advisor, CPA and other specialists to put all the pieces in place.

The estate planning information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal advice. Youngs Advisory Group does not provide legal advice. Youngs Advisory Group cannot guarantee that such information is accurate, complete, or timely. Laws of a particular state or laws that may be applicable to a particular situation may have an impact on the applicability, accuracy, or completeness of such information. Federal and state laws and regulations are complex and are subject to change. Always consult an attorney regarding your specific legal situation.