Mar 01, 2017
By Rob Myers, CFP® Investment Advisor Rep at World Trend Financial
If you are taking the time to read this article, chances are good you actively participate in your financial planning. And while the assets you own are a vital piece of your financial picture, a sometimes overlooked planning opportunity is the registration of those assets. By registering assets appropriately, an account owner can maintain strategic control, not only during life, but also upon death. This article will review three of the common non-IRA registration types and how they may affect your financial plan.
One Account Owner
Individual Transfer on Death Account (TOD): An Individual Account is just that, an account owned by a single person, such as a solely registered brokerage account. Upon the account owner’s death, the Individual Account will go through probate to be distributed according to the decedent’s Will. Assuming the Will is updated to reflect the decedent’s final wishes, the account will be passed along as desired.
The key takeaway here: Probate. By going through the court probate process a few things occur:
- The assets are included in the deceased’s estate and become public record.
- A probate fee can be levied against the estate.
- The probate process can last for an extended period, potentially limiting access of interested parties to the account.
The owner of an Individual Account could avoid probate by updating the registration to a Transfer on Death account. The Individual TOD registration enables the owner to name beneficiaries to the account. Upon the account owner’s death, all assets within the account pass directly to the named beneficiaries while avoiding probate.
Multiple Account Owners
Joint Tenants with Rights of Survivorship (JTWROS): When two or more people wish to own an account together, one registration type available to them is Joint Tenants with Rights of Survivorship. Under the JTWROS umbrella, each person has equal ownership of the account. At the death of one account owners, the surviving owners inherit the deceased member’s share. Similar to the TOD account discussed above, assets registered JTWROS pass to the heirs avoiding probate.
JTWROS is commonly used when a married couple wishes to open a brokerage account, or own a home together. At the death of the first spouse, assets registered JTWROS pass smoothly to the survivor, an important feature when continuity of use of the asset is necessary.
Joint Tenants in Common (TIC): Perhaps you want to own an asset with other individuals, but wish to control what happens to your ownership share upon your death. In this scenario, a Joint Tenants in Common (TIC) account may serve you best. At death, your share of the asset is included in your estate and passed on according to the direction of your Will. Of course, because it is included in your estate, the asset will be subject to probate.
TIC registrations are commonly used in non-spousal investment accounts and real estate dealings. They are also valuable for couples entering a second marriage, where children from prior relationships are involved. In the case of a second marriage, the couple can assure a specific percentage of a designated asset reaches their intended heirs without interference.
Please note: Owners of JTWROS and TIC assets have the ability to initiate transactions without the consent of the other owners, unless specific provisions are made. In the specific case of a brokerage account, one owner can initiate trades or request distributions without approval from the joint owners.This article provides a general overview of the registration types discussed. It is not a recommendation or opinion of any kind. If you believe a registration change may benefit you, an individual review is warranted prior to making any changes. In some instances, your attorney should be involved to review the titling accurately reflects what is specified in your estate documents. Please do not hesitate to contact Rob Myers at firstname.lastname@example.org, or your World Trend advisor with questions, or to set up a time to for a detailed review.