In a recent post, we reminded investors of the importance of naming and reviewing beneficiaries – especially as the holidays approach. The end of the year is filled with (good) distractions, so now is a great time to double check your investment accounts. It can give you one more thing to be thankful for – that your hard earned assets will be distributed to your family, consistent with your wishes.
In our previous post, we mainly focused on retirement accounts, like 401(k)s and IRAs. Retirement accounts, life insurance policies, and annuities all have beneficiary designations. You can just fill out a form to indicate how and to whom you want your assets dispersed, in a fairly straightforward and easy process.
But what about taxable accounts like a brokerage account or joint tenants with rights of survivorship (JTWROS) accounts? These types of accounts are common amongst investors, yet there is no beneficiary designation attached to them. That’s where establishing a “transfer on death” (TOD) registration comes into play.
The Easily Forgotten Beneficiary Designation: “Transfer on Death” Registration
On nonretirement accounts like an individual brokerage account or a JTWROS, designating a beneficiary or beneficiaries establishes a ‘transfer on death’ registration for the account. For an individual account, the transfer on death generally works like the beneficiary designation on an IRA – upon death, the assets will be transferred to the person named in the paperwork.
For a JTWROS account, if one of the persons named on the account passes away, the assets flow to the surviving spouse. If both persons pass away at the same time, however, the transfer on death registration is triggered. In this sense, the TOD can be thought of as an effective backup plan.
An Important Note: Be Sure Your Beneficiary is Equipped to Manage the Assets
When designating beneficiaries – whether on an IRA or an individual brokerage account or on a life insurance policy, etc. – it is important to consider whether the beneficiary you name is willing and able to manage the assets. For some, the burden of death may be too much to handle, and/or they may simply not be comfortable handling financial matters. It makes sense to talk with your beneficiaries so they understand your wishes, and so that they have the guidance for how to care for the assets over time.
Contact WrapManager for Help Setting Your Beneficiaries
One of our Wealth Managers here at WrapManager can review all of your investment accounts, while having a constructive conversation with you about how you want your assets distributed in the event of your passing. It is often a difficult conversation to have, but that does not make it any less critical. We can also offer suggestions for how to prepare your beneficiaries for how to manage the assets in the future, and can even help with the management. To learn more, please give us a call at 1-800-541-7774 or send us a note to wealth@wrapmanager.com.
