Gary Altman, an estate-planning attorney in Rockville, Md., recently had a client turn to her brother-in-law to cover bills after her husband died.
The client had plenty of money, but she couldn’t readily access it because some of the accounts were in her husband’s name alone and financial institutions often freeze single-owner accounts when a person dies.
“Her spouse died with assets in his own name, and their joint accounts were not large enough” to cover daily expenses, Mr. Altman said.
Mr. Altman’s client eventually got court authorization to manage her husband’s accounts, but hers was an avoidable problem. (WSJ)
The lesson here being to title your asset accounts with care.
When we meet with you to do a review, we have you verify the beneficiaries on your retirement accounts, but other accounts you hold may not have had the beneficiaries updated since they were opened. It’s important to check that you’ve got the properly designated beneficiaries on all retirement accounts, as well as making sure that bank and brokerage accounts also have designations for how they can pass to heirs.
Similar to designating beneficiaries for your retirement accounts and life insurance policies, you can add a transfer on death (TOD) for investment accounts and a payable on death (POD) for bank accounts. Assets such as a home that are held jointly with a right of survivorship (JTWROS) also avoid probate. If you have a trust, make sure the account has been titled in the name of the trust to avoid any problems. Many people have set up trusts, and then neglected to re-title their accounts to be included in it.
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Joint Tenants With Right of Survivorship (JTWROS). Each party has equal right to the account’s assets. Each party also has the right of “survivorship”—when one co-owner dies, all the assets in the account can pass to the other co-owner(s) without going through probate.
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Transfer on Death (TOD). The individual keeps control of the brokerage account assets during their lifetime. After they die, ownership is passed to the named beneficiaries. The owner can change beneficiaries or cancel the TOD anytime.
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Payable on Death (POD). Like the Transfer on Death designation, but for bank accounts.