TOD/POD on Joint Accounts

[PatrickA5]

Yesterday I was reviewing/updating all of my financial accounts making sure my beneficiaries were up to date. Everything was going along great until I wanted to do a TOD (Transfer on Death) on a "joint" mutual fund account at Vanguard. Evidently, at VG you can only do a TOD if it's an individual account. The phone rep said (obviously) that the surviving spouse (joint account holder) would get the money in the event of my death. I was wanting to put my kids as TOD in case both my DW and I were to die at the same time, or more likely, one of us dies but the other doesn't remember to update the account with a TOD later. The phone rep said "that's what a Will is for" - which is true and I already have one.

Anybody have a joint account at Vanguard and were able to do a TOD? At Fidelity I was able to set up my kids as contingent beneficiaries on a joint account.

 

[Sarah in SC]

They are correct. Joint accounts (TRWROS) will only offer right of survivorship to the other tenant. You will need to indicate the disposition of those funds in your will.
I wouldn't rely on the efficacy of what you set up at Fido unless you clarify this with them. I know Schwab doesn't typically offer this feature on anything but individual accounts.

Or, conversely, consider creating a Revocable living trust (RLT) account instead for those assets. Then the trust terms will dictate how the money is distributed.

Are your children under age? Then the trust is probably the way to go.

 

[Dimsumkid]

Interesting, we talked to Vanguard to add our son as the beneficiary (he's a minor) and they had us set him up as the primary beneficiary on our joint account (JTWROS). Vanguard explained to us he would need a guardian, but we do have a trust to take care of this issue.

I just checked our Fidelity joint account and it's set up the same way.

 

[Alan]

I'm sure Sarah is right.

For our IRA's, which are obviously in single names, we have each other as the primary beneficiary and then our children as secondary, but with the joint account then it is our will that determines where the account balances go. We don't have any joint accounts with Fidelity so I can't check.

I remember hearing that some folks actually delay or forget to change beneficiary information on 401k's after a divorce, and when they die the named beneficiary overrides the will.

 

[PatrickA5]

Does it matter what kind of account it is maybe? For example, all of our CDs and savings accounts at Ally are Joint accounts and we have PODs (payable on death) with the kids names on all of them. I'm not sure what the difference between POD, TOD and beneficiary designations are. They all seem to do the same thing.

 

[Dimsumkid]

Does it matter what kind of account it is maybe? For example, all of our CDs and savings accounts at Ally are Joint accounts and we have PODs (payable on death) with the kids names on all of them. I'm not sure what the difference between POD, TOD and beneficiary designations are. They all seem to do the same thing.

I think it's also a company choice. I just checked my TD Ameritrade acct and it's JTWROS w/TOD to our son. Thinking back, Vanguard won't let you use TOD on a joint acct, so we set it up as a primary beneficiary to our son instead. We did this in case something happened to both of us, then if you had no beneficiary designation or it was in your will, the money wouldn't be available until probate, which can take a long, long time. For JTWROS, POD,TOD and beneficiary designations all you have to do is show the death certificate and control of the account can be transferred.

From what I've read, it's based on the industry, banks tend to use POD and brokerages tend to use TOD. Here's an article on using these types to avoid probate:

Kiplinger.com

 

[lowflyer]

Just updated our beneficiary designation on a joint account at Schwab a few months ago. The wording on their form is:

"At the death of the account holder or, in the case of a joint account, at the death of the last surviving account holder, all of the assets in the account shall be transferred to the following beneficiaries who survive the last surviving account holder by 120 hours."

 

[Sarah in SC]

Oh, Lowflyer, you are talking about the beneficiary plan agreement, the Schwab plan you have to (usually) pay to have set up.
Yes, that can be a Jt Ten account--this is from the plan agreement form we use:

Your account(s) must be registered as Individual or Joint Tenants with Rights of Survivorship, Tenants-by-the-Entirety or Community Property with Rights
of Survivorship. Before changing your registration in order to become eligible for the Plan, please consult your attorney or other estate planning advisors.

I thought the OP was talking about regular beneficiary designations. I wouldn't think the POD is an ideal way to handle assets of a substantial size, better to go with the trust, in my mind.

 

[lowflyer]

Oh, Lowflyer, you are talking about the beneficiary plan agreement, the Schwab plan you have to (usually) pay to have set up.
Yes, that can be a Jt Ten account--this is from the plan agreement form we use:

Yes, that is what we did. Not sure about the paying for it you refer to, but this was simply a "Designated Beneficiary Plan" form and took care of things the way we wanted. I agree that the larger these accounts are, the more you need to pay attention to these account designations and make sure it's doing what you want.

 

[Nords]

I thought the OP was talking about regular beneficiary designations. I wouldn't think the POD is an ideal way to handle assets of a substantial size, better to go with the trust, in my mind.

The POD avoids probate at least as well as a trust, and at a much lower cost.

I've been moving a portion of my Dad's assets into CDs, and setting up those CDs with POD (to my brother and myself) enables me to reduce the remaining estate's probatable size to under $60K. In his state of residence, under $60K means no probate.

But I wish he'd had a trust to handle the issue of appointing a successor trustee in case of disability or inability.

 

[Sarah in SC]

Yes, that is what we did. Not sure about the paying for it you refer to, but this was simply a "Designated Beneficiary Plan" form and took care of things the way we wanted. I agree that the larger these accounts are, the more you need to pay attention to these account designations and make sure it's doing what you want.

Ah, ok. We rarely do these for clients, because most of them use trusts, but I recall there was a $50 or $100 fee per year to keep them in effect.

Nords, sounds like a good plan y'all are working to avoid probate for your dad. I agree a trust would have made it a whole lot easier to manage.

 

[PatrickA5]

Most of my 91 YO fathers assets are either held Joint with me, POD or TOD. The only remaining probatable asset was his house and we recently did a Transfer on Death Deed on his house. Upon his death, the deed for his house automatically is transferred to my brother and me. It's not available in every state, but will do the job of avoiding probate if all that is left is the house.

 

[meierlde]

Most of my 91 YO fathers assets are either held Joint with me, POD or TOD. The only remaining probatable asset was his house and we recently did a Transfer on Death Deed on his house. Upon his death, the deed for his house automatically is transferred to my brother and me. It's not available in every state, but will do the job of avoiding probate if all that is left is the house.

Just a brief note that these transfers do not relieve the estate tax if applicable. The total value of the estate still needs to be totalled to see if the federal or state estate taxes apply. Further transfers can be clawed back if need be to pay the taxes.

In Tx I handled both my parents estates, and mostly everything was by will, which was fairly painless, just file an inventory and you are done. Attorney fee was like 1% of the estate. I think all the advice should say depending on where you live. Tx has the independent executor model.

 

[molly]

We found the same information as Patrick.
We moved all of our taxable accounts over to Fidelity from Vanguard. Depending on your state, Probate/Succession can be messy. With POD/TOD (Totten Trust) a lot can be avoided. Vanguard has different rules for IRA accts. It is not the perfect answer but since we plan to move whenever we can sell our house - we don't want to set up a trust in a state (Napoleonic Code) that we will be leaving.
TOD/POD, Totten - limits the total amount of estate that is subject to Succession in Louisiana (providing the accounts are originated out of state).

 

[Dimsumkid]

Anybody have a joint account at Vanguard and were able to do a TOD?

Update: I had only checked the beneficiary info online and it doesn't show TOD, but I just looked at the paper statement and my JTWROS acct w/Vanguard is a TOD setup in June 2011 and I checked my other acct and it was also setup the same way JTWROS w/TOD in Nov. 2008.

 

[Life_is_Good]

I'm with Dimsumkid on this one. I just checked my Vanguard paperwork and I have a TOD set up on my JT TEN WROS account. Also, I have paperwork on my Vanguard IRA naming primary and secondary retirement beneficiaries - though they are not calling it a TOD.

 

[PatrickA5]

Hmm, seems like I might need to contact Vanguard again and see if somebody else gives me a different answer. Thanks for the replies.