TOD for non retirement brokerage account

[SecondCor521]

Quote:

Originally Posted by gwraigty So, if I understand you, you're going to put funds that now legally belong to both of you, in your name alone, making the funds legally only yours, just to stay with Vanguard.

Emphasis added.

I'm single, so I don't have a dog in this fight (well, I do have assets at Vanguard).

Things may be different in Ohio. In my state, what was mine was hers and, in theory, vice versa. If you're married and are Idaho residents, this applies to both assets and liabilities. The only exception I am aware of is that both spouses must agree if a real estate purchase is attempted, and gifts and inheritances which are kept segregated are considered separate property. When I was divorced, the 50/50 split was done with zero regard for whose name happened to be on the title.

Part of that may be because Idaho is a community property state. I know there are other states that are also community property, but I'm not sure if that term is why it works as I described in the previous paragraph.

On a somewhat related note, I have POA on my Dad's finances, and it was pretty easy to just send a scanned copy in to Vanguard.

[gauss]

If it was me I would leave it in a joint account with my spouse. I would have a will designating that the kids get assets. Problem solved.

Probate in my state is a fairly simple process -- especially considering that someone could be inheriting tens of thousands of dollars.

I went through the process with my deceased father back in 2014 and realized that probate was nothing to be feared.


-gauss

[N02L84ER]

Quote:

Originally Posted by ER2B VG rep said that this transfer from joint to individual is a none sale event. Why would there be capital gains.

We had funded 3 taxable funds and each was joint listing Name1 and Name2 on them. We accidentally funded a 4th taxable fund and filled out the form as Name2 and Name1. When I noticed the difference years later and called to ask about getting the last fund listed as Name1 and Name2, I was told I would get a 1099 and would have to pay the tax on the reported gains. We decided not to change the name order. This was more than 15 years ago. Maybe the rep I talked to was wrong? Or, maybe what we were trying to do was different than going from joint to individual? Although I would have thought our change was less likely to generate a taxable event than going from joint to individual. Anyway, I just thought I would warn you that you might be generating a taxable event.

[bingybear]

Quote:

Originally Posted by SecondCor521 Emphasis added. I'm single, so I don't have a dog in this fight (well, I do have assets at Vanguard). Things may be different in Ohio. In my state, what was mine was hers and, in theory, vice versa. If you're married and are Idaho residents, this applies to both assets and liabilities. The only exception I am aware of is that both spouses must agree if a real estate purchase is attempted, and gifts and inheritances which are kept segregated are considered separate property. When I was divorced, the 50/50 split was done with zero regard for whose name happened to be on the title. Part of that may be because Idaho is a community property state. I know there are other states that are also community property, but I'm not sure if that term is why it works as I described in the previous paragraph. On a somewhat related note, I have POA on my Dad's finances, and it was pretty easy to just send a scanned copy in to Vanguard.

Yes there 9 states with community property laws... thus less common. When we did our first trust we had everything separated as it was the only way we knew of to capture both unified exclusions. Laws changed and now that construct is not necessary to capture that. There may be other reasons since I don't use that now.

[bingybear]

Quote:

Originally Posted by gauss If it was me I would leave it in a joint account with my spouse. I would have a will designating that the kids get assets. Problem solved. Probate in my state is a fairly simple process -- especially considering that someone could be inheriting tens of thousands of dollars. I went through the process with my deceased father back in 2014 and realized that probate was nothing to be feared. -gauss

I haven't been thru probate, but what I hear it is all in the public record. Thus all your info as to assets are made public. I know after my dad passed that sharks were out to rip off my mom.

I think the privacy is worth something.

[ER2B]

Quote:

Originally Posted by gauss If it was me I would leave it in a joint account with my spouse. I would have a will designating that the kids get assets. Problem solved. Probate in my state is a fairly simple process -- especially considering that someone could be inheriting tens of thousands of dollars. I went through the process with my deceased father back in 2014 and realized that probate was nothing to be feared. -gauss

This is exactly what my brother advised us. I think lawyers fueled this fear of probate to force us to do trusts. I was a trustee to my aunt's estate and her lawyer made money setting up her trust. But also made a lot of money handling the trust after she passed.
We've created two individual taxable accounts with VG. They're there if we decide to split the joint account. Looking at all the replies here, I doubt we're changing anything.

[pb4uski]

Quote:

Originally Posted by N02L84ER We had funded 3 taxable funds and each was joint listing Name1 and Name2 on them. We accidentally funded a 4th taxable fund and filled out the form as Name2 and Name1. When I noticed the difference years later and called to ask about getting the last fund listed as Name1 and Name2, I was told I would get a 1099 and would have to pay the tax on the reported gains. We decided not to change the name order. This was more than 15 years ago. Maybe the rep I talked to was wrong? Or, maybe what we were trying to do was different than going from joint to individual? Although I would have thought our change was less likely to generate a taxable event than going from joint to individual. Anyway, I just thought I would warn you that you might be generating a taxable event.

I'm pretty sure you could avoid a transfer from taxable Name2 and Name1 to taxable Name2 and Name1 from being a taxable event by having the shares transferred "in-kind".

Even if they did issue you a 1099 you could treat it as erroneous and not report the gain, but it would be better to avoid it if you can.

[gwraigty]

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Originally Posted by pb4uski To be clear, qwraigty has a well-known grudge against Vanguard with respect to this issue that was discussed at length in a different thread within the last few months.

To be even more clear, I do have a grudge against Vanguard with respect to several poor customer services issues, not just specifically this issue.

We don't have any taxable accounts with Vanguard. This is one issue that hasn't affected us in the slightest. I don't care if people want to stay with Vanguard, as long as they're content with what they're getting. But when someone has a complaint and there's an alternative solution, I see no harm in pointing it out.

I was more puzzled (and perhaps, concerned) by the OP's willingness to turn a joint asset into his sole asset without considering potential consequences of doing so, for both himself and his spouse. I'm glad he's rethought that plan.

[karen1972]

I was going to say I had just contacted Vanguard about this as I couldn't find the place to change my beneficiaries for my brokerage account and they had sent me instructions so I knew they allowed it.

I do find it funny that I could change my IRA selections easy peasy, but the taxable account had all this special language surrounding it about unforeseen consequences, please consult tax attorney, be careful you don't do something bad that overrides your will/estate/etc.

[gwraigty]

Quote:

Originally Posted by SecondCor521 Emphasis added. I'm single, so I don't have a dog in this fight (well, I do have assets at Vanguard). Things may be different in Ohio. <snip> On a somewhat related note, I have POA on my Dad's finances, and it was pretty easy to just send a scanned copy in to Vanguard.

Ohio isn't a community property state, so that does color my perspective and understanding of the issues. Jointly owned property is deemed to belong to all the owners in equal shares.

Without knowing the details of the OP's finances, it's hard to know if his original plan might have made things difficult for his spouse. If the taxable Vanguard account is the bulk of accessible money for daily living, or not. If the tax deferred accounts can be readily accessed now without penalty or unfavorable tax consequences. If they have POAs in place already on the retirement accounts, just in case of incapacity. Lots of pieces to the puzzle.

[ER2B]

Quote:

Originally Posted by karen1972 I was going to say I had just contacted Vanguard about this as I couldn't find the place to change my beneficiaries for my brokerage account and they had sent me instructions so I knew they allowed it. I do find it funny that I could change my IRA selections easy peasy, but the taxable account had all this special language surrounding it about unforeseen consequences, please consult tax attorney, be careful you don't do something bad that overrides your will/estate/etc.

The system freezes after you enter beneficiaries for taxable accounts. Says must speak to a VG rep.

[nwsteve]

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Originally Posted by ER2B The system freezes after you enter beneficiaries for taxable accounts. Says must speak to a VG rep.

Vanguard excels at making simple things exhausting. YMMV

[SecondCor521]

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Originally Posted by ER2B The system freezes after you enter beneficiaries for taxable accounts. Says must speak to a VG rep.

That must be relatively new. I added beneficiaries to my Dad's taxable account (I have POA) within the past two or three months online and it worked fine. Didn't need to speak to a rep.

[MRG]

Quote:

Originally Posted by pb4uski To be clear, qwraigty has a well-known grudge against Vanguard with respect to this issue that was discussed at length in a different thread within the last few months. Realistically, it is only an issue if the joint account owners die simultaneously (from a legal perspective) which is possible but unlikely. State laws vary and I suspect Vanguard has its reasons for not allowing beneficiaries on joint accounts when other financial institutions do... likely not wanting to get dragged into a legal dispute about whether or not a death was simultaneous or not.

Over my career I argued with Vanguard, much to my surprise they had reasons for their decisions. Actually it was a welcome change in an industry full of - " Because we've always done it this way" mentally.

[gwraigty]

Quote:

Originally Posted by SecondCor521 That must be relatively new. I added beneficiaries to my Dad's taxable account (I have POA) within the past two or three months online and it worked fine. Didn't need to speak to a rep.

If it's not a joint taxable account, there might not be an issue.

[ER2B]

Quote:

Originally Posted by SecondCor521 That must be relatively new. I added beneficiaries to my Dad's taxable account (I have POA) within the past two or three months online and it worked fine. Didn't need to speak to a rep.

Remember. You're dad's taxable account is an individual account. No problem with that. Try adding beneficiaries to a joint taxable account in VG.

[PatrickA5]

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Originally Posted by ER2B Wife and I thought we might ask this group how to handle this issue. The VG rep we talked to said that they used to but have stopped allowing beneficiaries or TOD transfer on death clauses on non retirement brokerage account. We'd rather not have to set up a trust to ensure that our children won't have to go to probate to access our brokerage account upon our demise. All our tax deferred accounts have beneficiaries and we've not had to worry about our taxable accounts since most of our money are in IRAs and ROTHs. But recently our VG taxable account has been growing. Now, we have not asked Fidelity about their policy. We may have to move the bulk of our taxable account there if they have a TOD policy. We have tax deferred accts with Fidelity but we'd rather stick with VG for our taxable accts. VG rep said that another option would be to name our children as co-owners. That would give them as much authority as us and would be non reversible.

This was one of the reasons (though minor) that we moved everything from VG to Fidelity earlier this year. I'm sure VG has their reasons, but we didn't want to jump through hoops trying to find a work-around to this issue (and other issues).

[SecondCor521]

Quote:

Originally Posted by ER2B Remember. You're dad's taxable account is an individual account. No problem with that. Try adding beneficiaries to a joint taxable account in VG.

Right, I get it. It's not clear to me that the other poster's issue with adding beneficiaries (being required to call a VG rep) was because they were trying to add to a joint taxable account, or if it was because Vanguard changed their process for adding beneficiaries to a single taxable account sometime in the last few months. I was just providing a data point.

Anyway, I have no joint taxable accounts at VG, and no need or interest to create one, so I can't follow your suggestion. I was under the impression that VG simply didn't allow adding beneficiaries to joint taxable accounts, so I would be a little surprised if they programmed their web site to tell people who were trying to do that to call in. It would be simpler and better IMHO for them to just have the website say, "Sorry, we don't do that."