B&C Financial Advisors | Titling Your Investment Accounts

The Importance of Titling Your Investment Accounts

by Sean Guldi, CFP®

Planning for one’s inevitable death is something few (if any) people look forward to. In some cases, people scramble to get things in order when receiving the terrible news of a terminal cancer diagnosis. In other cases, people may have a plan that is several decades old and may or may not reflect their current wishes on how their estate is distributed when they are gone. We have seen instances of this with our own family, friends, and clients. B&C Financial Advisors partners with our clients and other professionals with whom they work (CPA, estate planning attorney, etc.) to coordinate the implementation of their estate plan including the proper titling of your investment accounts. One area occasionally overlooked is the titling of assets and beneficiary designations.

Wills are the bedrock of estate planning and one with which people are most familiar. Images of handwritten notes on one’s deathbed or families gathered around a lawyer to receive their bequest are often portrayed in books and movies. In its simplest form, the will is just that – the distribution of one’s property after death. Probate, the process of distributing assets according to a will, can be a cumbersome and lengthy process. Some property is not necessarily subject to your will, and alternative account types can remove property from probate.

For instance, any asset with a beneficiary designation, such as retirement accounts (401(k)s, IRAs, ROTHs) and life insurance policies, are not required to go through the probate process. Other types of accounts with beneficiaries include Joint Tenants with Rights of Survivorship (JTWROS), and Tenants by the Entirety. The first allows for property to pass to the other joint tenants proportionate to their ownership (often husband and wife), the second is a title specific to a husband and wife and is only available in certain states.

Two other types of accounts that allow for property to pass outside of a will are Payable on Death (bank account) and Transfer on Death (brokerage account). These work in the same fashion as a retirement account: the property owner designates a beneficiary, and, upon their demise, the beneficiary receives property outright—not subject to wills, trusts, or probate.

The last type of account titling is that of a trust. A trust is used to provide legal protection, ensure assets are distributed according to the grantor’s wishes, and avoid probate.

In most instances, the beneficiary designation or trust establishment provides a means for handling one’s affairs in a more efficient manner than that of a will and the probate courts. Please consult with your estate planning attorney if you have questions about the titling of investment accounts.