For those who aren’t immortal, their brokerage account will surely outlive them. In many cases, the account would become part of the estate and have to go through the often lengthy probate process. But there are options for getting these accounts into people’s hands more quickly—as long as they can provide a copy of the death certificate. (Yes, one thing you won’t miss in the hereafter is bureaucracy!)
For now, we’ll focus on the option of joint ownership. Let’s use joint tenants with the right of survivorship (JTWROS) as an example. It simply means that more than one owner has exactly the same right of ownership to something by tenants. In this case, we’re talking about a brokerage account or a portfolio of stocks and investments managed under an account.
If you have such an account set up as a JTWROS, then any surviving “tenants” inherit it immediately (no probate required) and can make decisions as they wish.
Now, the temptation might be to cash out portfolio holdings sooner than later for some surviving tenants. But for investors who built and kept wealth using a long-term investment approach, haste could really mean waste. The potential for getting out at an unwise time, for example, is always a risk. That’s why whether or not to create a JTWROS is actually a very important decision in one’s estate planning.
But a JTWROS is not the only option. There’s also the designated beneficiary option. For example, a person named in someone’s life insurance policy is a designated beneficiary. But in your will, you can also name one or more designated beneficiaries to inherit certain stocks or even portfolio accounts that you own. It’s essentially the same as what happens with an IRA. And, of course, nothing is easy. There are actually three different categories of beneficiaries: eligible designated beneficiaries, designated beneficiaries, and non-designated beneficiaries.
Yes, it’s complicated—but essential. To untangle your options and make sure your portfolio lives happily ever after (hopefully), you should consult with your financial planner. Also, a good plan: live as long and as healthy as possible!
This communication is for informational purposes only and should not necessarily be regarded as legal, tax, or customized financial advice or comment or as an official statement of the firm, or any agents thereof. The material being provided is thought to be accurate. However, the information is compiled from multiple resources and may become outdated or otherwise rendered incorrect by new research or corrections, without notice J.L. Bainbridge & Co., Inc. is not a broker dealer and does not offer tax or legal advice. Please consult your tax or legal advisor for assistance regarding your individual situation. It should neither be assumed that future results will be as profitable or that a loss could not be incurred. For more information related to our firm, please see our disclosure brochures at jlbainbridge.com and https://adviserinfo.sec.gov/firm/summary/108058.
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