vanguard beneficiary policy stinks

[mathjak107]

we have 3 kids and we were able to add all 3 kids as beneficiaries to our joint account at fidelity.

we use fidelity as we would a bank with all direct deposits and bill pays made through them . so the fact we don't have to split account ownership to simply add beneficiaries is a big plus. fidelity calls it a tod .

 

[RunningBum]

Is there a difference between a TOD account and listing beneficiaries?
I've been meaning to research this question but never got around to it.

TOD (which isn't an "account" but rather a provision on your account) bypasses probate, so your heirs would get their money more quickly. It would probably reduce probate costs too.

 

[Cobra9777]

Splitting a joint account into 2 individual accounts is not a real solution. That's a crude workaround.

 

[mathjak107]

i will wait for fidelity to offer cash again promo's and move it out of vanguard .right now fidelity is offering only hundreds of free trades .

 

[RunningBum]

Splitting a joint account into 2 individual accounts is not a real solution. That's a crude workaround.

I agree. The only disadvantage I can see right off is that it could put you out of Flagship status, plus it's the second account to keep track of, but I can imagine there are other issues.

Quite an eye opener, mathjak. It might be enough to move me out of VG if I had a joint account.

 

[mathjak107]

i only found it by accident . i am like why is it saying no beneficiaries designated . this is a 2nd marriage and we are very careful about including all kids equally on everything .

 

[braumeister]

Finally, YMMV but I didn't need as many death certificates as I got.

When my parents died (16 years apart) I needed more than the funeral home provided. Both times I had to go to the local state government office for them. Parents didn't have any local accounts so everything had to be handled by snail mail. I would always advise people to get at least one or two more than they think they need. They're not necessarily cheap, so it's wise to consider carefully.

 

[JoeWras]

If we both kick it, I guess I don't care if our bill payees have to wait a month or two to get paid but I would like to minimize stress on heirs/executor so maybe a small Credit union cd would work. These generally transfer to beneficiary with no penalty.

The first bill will likely be the funeral home. They will be looking for payment. I'm not recommending this, but a life insurance policy can be assigned to pay the funeral home and cemetery first if the heir produces the policy and assigns it.

 

[euro]

i will wait for fidelity to offer cash again promo's and move it out of vanguard .right now fidelity is offering only hundreds of free trades .

That's what I found too - but Schwab still has a cash offer going, I think. Alas, you'd have to check first if Schwab allows beneficiaries on joint accounts, but my bet is that they do. I think Vanguard is the outlier here.

 

[Alan]

I agree. The only disadvantage I can see right off is that it could put you out of Flagship status, plus it's the second account to keep track of, but I can imagine there are other issues.

Quite an eye opener, mathjak. It might be enough to move me out of VG if I had a joint account.

Having seperate accounts does not affect Flagship status for a married couple. My wife and I each have individual IRA accounts plus my wife has a brokerage account in her name only. (It used to be a joint account but I had my name taken off in readiness for our move back to England where everyone is taxed individually with their own tax exempt allowances etc).

We also gave each other agent authorization over our accounts so it is very easy to manage all the accounts through a single login.

 

[mathjak107]

so the question is :

if it is a joint account , in the event of a common death with no beneficiaries .will the money pass to the estate with no probate ? once it is in the estate can it be distributed per a will's instructions with out probate ?

 

[Dash man]

Yes, it is an interesting question.... and I cannot see Vanguard not taking this into account as it is a very common to have in any kind of estate planning....

Not having it would be a big hole....


Edit to add.... there are issues with two people being in the same accident and dying at different times... this can be addressed in a will.... not sure if it can be with a joint account....

IOW, both are in the same car accident and go to the hospital..... one dies right away.... the other lives on for a few days but eventually dies... in a will you can say that if both die within 30 days it is like the other person was already dead... so if you leave everything to someone you do not pass all asset to them and then it is distributed through their will...

I am not saying this well, but I hope I am giving enough info so people can think about it...

This situation is why we got a trust. We each have a child from a previous marriage. Each will get their share as at the death of the second of us the assets go into separate trusts for each child.

 

[gindie]

Finally, YMMV but I didn't need as many death certificates as I got. SS may have kept one but everyone else was happy looking at it, maybe copying it and then handing it back to me.

Yeah, Prudential Insurance was the best in that regard when my Mom passed away. Got on the phone with them, they asked when and where she died, and the representative looked up the Obit on Legacy.com right then and there. Said that's all she needed!

The check came about a week later.

 

[pb4uski]

so the question is :

if it is a joint account , in the event of a common death with no beneficiaries .will the money pass to the estate with no probate ? once it is in the estate can it be distributed per a will's instructions with out probate ?

Estate Planning For Simultaneous Deaths | Investor Solutions

Consequently, the jointly held property of each spouse, including insurance proceeds and retirement accounts, goes into separate probate. This is a nuisance for their heirs and increases administrative expenses. For couples with enough assets to face estate taxes, however, it can be very expensive.

 

[mathjak107]

i kind of thought that wouldn't work. but that article is really about what happens where they can't determine who died first .

 

[LOL!]

Splitting a joint account into 2 individual accounts is not a real solution. That's a crude workaround.

I think it is clever and would work for us. We have a joint account with a single investment in it that we have made zero transactions in it for several years now and don't expect to make any transactions until one of us dies.*

So we could split that into two individual accounts with each of us the primary beneficiary and the kids as secondary beneficiaries. That would give them enough cash to get through many months before wills are probated.

Vanguard allows multiple instances of types of accounts, so multiple Roth IRAs for me, multiple IRAs for my wife. Thus, multiple taxable accounts will not be a problem.

*But even if we did have transactions, it would not be a big deal.

 

[jazz4cash]

TOD (which isn't an "account" but rather a provision on your account) bypasses probate, so your heirs would get their money more quickly. It would probably reduce probate costs too.

Thanks RunningBum but it is my understanding that designating beneficiaries on a regular account bypasses probate as well. We confirmed this when we prepared our wills.

So far I don't see any need or benefit for joint accounts so we have individual accounts with spouse as primary and adult children are contingent.

 

[googily]

Thanks RunningBum but it is my understanding that designating beneficiaries on a regular account bypasses probate as well. We confirmed this when we prepared our wills.

So far I don't see any need or benefit for joint accounts so we have individual accounts with spouse as primary and adult children are contingent.

The difference with joint accounts is that that money belongs to both of you, and the survivor has access to it immediately. Otherwise you have to deal with giving the bank or brokerage firm the death certificate and waiting for them to pay you.

Between after-tax and retirement accounts and savings accounts, our joint holdings were over $1.7 million, but the full value of DH's estate that actually required probate, consisting of a checking account and his car, came to $8,000.

(There was also one personal savings account of his that I was TOD beneficiary, and it took more than 12 weeks and three letters to AmEx Personal Savings to finally get paid out--all of that for $1,100)

Everything else was jointly held (or passed via beneficiary designation, such as his 401k).

And as other people have said, a survivor will have some leeway in paying bills. In fact, in terms of some credit cards he held solely and medical bills of his, my estate attorney has insisted that I pay none of them until six months after the notice to creditors was run in a local paper.

 

[Cobra9777]

I think it is clever and would work for us. We have a joint account with a single investment in it that we have made zero transactions in it for several years now and don't expect to make any transactions until one of us dies.*

So we could split that into two individual accounts with each of us the primary beneficiary and the kids as secondary beneficiaries. That would give them enough cash to get through many months before wills are probated.

Vanguard allows multiple instances of types of accounts, so multiple Roth IRAs for me, multiple IRAs for my wife. Thus, multiple taxable accounts will not be a problem.

*But even if we did have transactions, it would not be a big deal.

Or you could move the account to Fidelity or Schwab and set it up properly with no [-]clever[/-] crude workarounds. Joint accounts exist for a reason.

 

[Murf2]

This thread has got me thinking. I have my wife as beneficiary on all my accounts. If I die she would get it all no kids or others.

My question, What happens if I lose my marbles? Does a POA outside of Vanguard take care of that? Do I need to make her an agent with Vanguard?
Thanks all
Murf

 

[mathjak107]

i wonder if vanguard will even turn the assets over to an executor of a will to be distributed under the will , without probate clearance first .

according to their website it says:

------------------------------------------------------
Joint accounts
Your Vanguard joint accounts don't need beneficiaries. Joint accounts simply pass to the surviving owner.
------------------------------------------------
but there are no provisions for common death . (me commenting )


--------------------------------------------------------------
from vanguard's site

Will
ADVANTAGES
Identify the parties entitled to your assets.
Specify how and when your assets will be distributed.
Allow for the most tax-efficient way to divide your assets.

DISADVANTAGES
Your assets may be subject to creditors.
Your assets will have to go through probate.

 

[JoeWras]

I will say dealing with Vanguard as a Trustee was a good experience. I did make a mistake with my Dad's trust after passing. Acting as Trustee, liquidated the account shortly after Dad's passing. But I forgot to let Vanguard know of his passing first. That was a dumb mistake.

What's the problem? Step up basis.

Guess what, "They had a form for that." Got the basis re-assigned for IRS purposes and we were good to go, despite my stupid mistake.

The biggest hassle with the trust was the incredibly thick and detailed application paperwork. And then the basis rework paperwork. There seems to be a lot of manual work involved with trusts.

 

[Rianne]

We found it's worth every penny to get a Living Revocable Trust. Upon both of our deaths, everything automatically goes into the trust and the trustee has complete control over assets with no probate involved. Doesn't matter who dies first or if we both die. The beauty of this is...if we both die, the trustee has the option of keeping everything in the trust, if it's an up market and economy going well. He has the control to disperse how he wants. For instance, 1/2 at this point in time to those who need most. Keep 1/4 in the market or sell all depending on the tax ramifications. All this can be set up exactly as you want it with your attorney, including IRA's, 401K, Roth. Nothing goes to probate. All this takes time and effort, no doubt. Have to do this with all accounts, no matter where they are. That's why we consolidated to a few accounts at different places so we have more control and know exactly what's going on.

 

[googily]

Also, given OP's concerns, trusts can be written to say that even if spouses die, say, 30 days apart, their deaths should be treated as simultaneous for matters governed by the trust.

Also, if trusts can be written so that, if you don't have jointly owned assets, your spouse as trustee can get access to them should you become incapacitated.

 

[mathjak107]

except for vanguard everything we have requires no trusts . everything has a beneficiary.

we already spent 1k each for 2 disclaimer trusts which we needed at one time to get around ny estate taxes . we really have no reason to create any other trusts and go through the costs and hassle of paper work .

disclaimer trusts are not for holding assets as they don't exist unless the surviving spouse wants to activate them . we hope we never have to as it splits the estate in to an irrevocable trust taking control and free access away .