As we have all heard, “By failing to plan, you are preparing to fail.”
In estate planning, failing to plan your account designations can result in costly probate proceedings. Probate is a court-supervised process that validates your Will (if you have one) and authorizes your Executor to distribute your assets. For example, we’ve seen probate costs reach $20,000 for a surviving spouse because an account was titled solely in the deceased spouse’s name—an expense that proper account designations could have prevented.
FAQ
What is a Transfer on Death (TOD) account?
A TOD account allows you to name beneficiaries who will automatically inherit the account upon your death, bypassing probate and simplifying estate planning.
How does JTWROS differ from JTIC?
JTWROS accounts pass directly to the surviving account holder, while JTIC accounts distribute the deceased holder’s share according to their will or state law.
Can retirement accounts avoid probate?
Yes. Naming a beneficiary on your IRA, 401(k), or other retirement account allows the assets to transfer directly, avoiding probate entirely.
Why is account titling important in estate planning?
Account titling can supersede your will. Reviewing designations ensures your assets pass according to your wishes and reduces probate costs.
How often should I review account designations?
It’s best to review account designations regularly, especially after major life events like marriage, divorce, or the birth of children.
Why Probate Avoidance Matters
Avoiding probate saves time, money, and stress for your beneficiaries. Proper account titling, including Transfer on Death (TOD) registrations and joint account designations, allows assets to pass directly to heirs, bypassing probate. Avoiding probate prevents unnecessary legal fees and ensures your estate transfers according to your wishes.
Key Account Designations to Simplify Estate Planning
1. Individual Accounts with TOD (Transfer on Death)
A TOD designation names beneficiaries who will receive the account directly upon your death, bypassing probate and ensuring a smooth transfer of assets.
2. Joint Tenants with Right of Survivorship (JTWROS)
JTWROS accounts automatically pass to the surviving account holder when one owner dies. A responsible joint holder can manage the account if the other owner becomes incapacitated. JTWROS supersedes the instructions in a Will, making proper titling critical.
3. Joint Tenants in Common (JTIC)
JTIC accounts are ideal for shared accounts that are intended to follow a will. Each account holder owns a proportionate share. When one holder dies, their share passes according to their will or state law.
4. Retirement Account Beneficiaries
For IRAs, 401(k)s, and other retirement accounts, naming beneficiaries ensures assets transfer directly, bypassing probate. Regularly reviewing beneficiaries is essential to keeping your estate plan current.
Benefits of Reviewing Account Designations
Proper account designations can help to:
- Ensure assets pass according to your wishes
- Simplify management for surviving heirs or joint holders
- Reduce probate costs and delays
Work With Estate Planning Professionals
Estate planning can be complex, especially for high-net-worth families. Coordinating with your estate attorney, investment advisor, and CPA ensures that all accounts—including TOD, JTWROS, JTIC, and retirement accounts—are properly titled. Proactive planning protects your wealth, avoids probate, and ensures a smooth transfer of assets to your heirs.