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Review Account Titles & Beneficiary Designations

Reviewing how your accounts are titled and who you have named as beneficiaries are important steps in making sure your finances are organized and up to date. It becomes even more important if you’ve recently completed or updated your estate plan because account titles and beneficiaries could undo, counteract, or override your estate plan.  

This week’s MoneyDo: Review the ownership structure of your accounts and make sure it aligns with, rather than alters, your estate planning goals.  

If you’ve experienced a significant life change like divorce, remarriage, or a tragedy like death of a spouse or child, your account titling and beneficiaries need to be updated. Unfortunately, we’ve seen too many instances where nothing was updated, which resulted in calamity. We’ve seen an ex-spouse still named the beneficiary of a retirement plan; or, after the death of the primary beneficiary, the disheartening discovery that there are no contingent beneficiaries, forcing the account through probate before being distributed.  

As mentioned before, titling refers to who is listed as an owner of an asset. There are a variety of ways to own an asset.  

    • Individual Account: one person owns the account. Assuming there is no beneficiary appointed, the account will be subject to probate without additional estate planning.  
    • Joint Account with Right of Survivorship (JTWROS): ownership between two or more individuals that automatically transfers or continues ownership of the asset in the surviving owners name after one of them dies. Each joint owner has access to 100% of the account. Ownership will override the provisions of an owner’s Will or Trust. The last surviving owner will have 100% ownership and control, at which time it becomes an individual account of the last owner.  

Beware of adding a child to an account as a joint owner, as you are giving that joint owner control and access to the account. So your child could use the funds as their own, to your detriment. If your child has creditor problems, those creditors may go after your account.  

    • Tenants in Common (TIC): unlike a joint account with right of survivorship, TIC is based on the proportional amount contributed by each owner. Ownership does not automatically pass to the other owners upon death and would be subject to probate and pass according to an individual’s Will.  
    • Trust: a Trust account is governed by the Trust document during life and at death. The Trust eliminates the need for probate when funded properly, but there are many types of trust that can have varying tax consequences that the owner should be aware of.  

Make sure to note which types of account titling pass according to title or by Will, via Probate. If you have a Trust, it is important to properly title accounts to utilize the trust.  

Another alternative to be used in conjunction with account titles is the proper handling of beneficiary designations.  

Beneficiary designations, also known as a Payable on Death or Transfer on Death, can be listed on a variety of accounts and direct who will receive the accounts upon your death. When used correctly as part of a comprehensive estate plan, beneficiary designations can help avoid probate. In addition to naming primary beneficiaries, it is important to name contingent beneficiaries.  

Consult with your estate planning attorney or financial advisor to ensure your estate plan is properly developed in a tax-efficient manner prior to naming Trusts as beneficiaries on retirement plans and IRAs. Naming a Trust as a beneficiary without a proper estate plan can have detrimental income tax consequences to your beneficiaries.  

It is important to review accounts and beneficiaries every few years. The more accounts you have, the more cumbersome reviewing and updating account titles and beneficiaries can be. Consolidation and simplification remain important components of financial and estate planning, making updates easier as your estate plan evolves. Doing so also ensures that all your financial accounts are properly aligned with your estate plan to make the transition to your heirs a smooth process. 




Annex Wealth Management provides free workshops, open to the public, on key wealth management topics.


Start the week off with insight and perspective from members of the Annex Wealth Management Investment Committee.