How Should I Title my Accounts?Submitted by Mission Financial Planning on August 17th, 2020
How you title an account, asset or business can affect current income and taxes, disposition in a divorce or incapacity, and ultimately directs how and to whom an asset can pass upon your death. Titling can also affect whether the asset is protected from creditors.
Assets can be held in your name, in a trust, with beneficiaries, and with joint tenants; each type of asset is treated uniquely in the estate process.
Joint tenant*, beneficiary and Transfer-On-Death designations take precedence over wills and trusts; this can be used to your advantage for getting specific assets to heirs, but if you’re not careful a missed beneficiary designation or titling mistake can preempt the intentions of your estate plan.
To avoid problems – while you are living or in an estate – proper titling is key.
Work with a financial planner or estate attorney to review the titling and beneficiaries of all assets, including real estate, businesses, bank accounts and other investments, even cars. Think through the contingencies that might affect each asset and how different titling might change how the money will be handled.
Owning an account in your name alone means someone may need a Power of Attorney to access the funds in the event of your incapacity, and it will be subject to Probate upon your death.
Ownership with another can be accomplished via Tenants-in-Common, Joint Tenancy with Rights of Survivorship and Tenancy-by-the Entirety. Subtle differences in these designations dictate creditor protection, how much of the account goes to a survivor, and rights of the co-owner.
Most common is Joint Tenancy with Right of Survivorship, you may see this as JTWROS on your account. Your share passes automatically to the surviving joint owner upon your death, taking precedence over directions of a Will or Trust and avoiding probate. This would generally be appropriate for a trusted spouse or family member because of ease of access. Tenants in Common is more like a partnership, each person having control of their piece, without the other person having survivorship rights. However, creditors have reach over both sides.
Ownership through a Living Trust can avoid Probate, and appoints others to direct what happens with your incapacity or death.
IRAs and other retirement accounts can only list the name of one owner, but the designated beneficiaries determine what happens at death. It is very important to list primary as well as contingent beneficiaries.
For further direction and definition of how you would want assets handled upon your death or incapacity, you may want to implement a combination of Wills, Living Trusts, and Powers of Attorney for financial and business decisions.
This blog is intended to be a starting place; we’re here to talk through the possibilities, help define your wishes, and facilitate conversations with family and attorneys. We can model how the money flows through the estate plan to make sure that your asset titles and beneficiaries direct the money in a way that is consistent with your planning objectives.
Read our other blog posts related to Estate Planning, including how to interview for a new estate attorney.
*To complicate things further, 10 states require or permit property to be held as community property. Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin use community property ownership for married couples (several states have specific rules for registered domestic partners. In Alaska, Tennessee and South Dakota choosing community property titling is a choice. That’s a topic for another day.