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  • Brokerage Account Beneficiary

    For those that have a Brokerage Account and a Trust, how do you have the Brokerage Account set up - Joint ownership, Single Ownership or as a Transfer-on-Death?  We completed Estate Planning about 3 years ago and set up Wills & a Trust.  About 1.5 years ago, I opened a Vanguard Brokerage Account.  In reviewing all my accounts, I was surprised to see that I can't add Beneficiaries to a non-retirement account.  I contacted our Estate Planning Attorney to ask whether we should make it a TOD account to the Trust and got an auto-reply that she closed her practice and moved to Europe!

     

    Currently my husband (non-medical) and I have our Vanguard Brokerage Account as a joint account but I'm wondering if it's better to just put it in his name (less likely to be subject to creditors?) or change it to a TOD account for the Trust.  Is there a simple answer or do I need to find a new Estate Planning Attorney to go over everything?

  • #2
    Did you call/speak to someone at Vanguard on your issue?  I find it odd to not allow beneficiary charges for non-retirement accounts.  The only reason/way I could potentially see this in a case where the beneficiary is an irrevocable trust; even then.....

    I could see/understand that in changing a beneficiary that Vanguard could require a medallion signature guarantee and could potentially take a couple weeks between the paperwork and processing to fully execute.  Our Vanguard taxable account was at one time was within a brokerage account and in the name of our trust (though a revocable trust).

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    • #3
      Yes, supposedly they are not required by the federal government to offer beneficiaries for joint non-retirement accounts, so no beneficiaries can be assigned.  I've been on the phone with Vanguard for the past hour and it seems the best strategy is to change ownership of the entire account to have our revocable Trust as the primary owner of the account (and my husband and I as co-trustees.)  I'm just curious if other people have run into this issue and how they handled it.  Thanks!

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      • #4
        to put our joint brokerage account "into" our trust we had to open a new account called an "estate account". and then we transferred the assets from the joint to the 'estate joint". we had to do this for two different institutions where we had joint brokerage accounts.  has something to do with the account registrations.

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        • #5
          The short answer is yes, you should seek out a new estate planning attorney in your state who can give you the correct answers to your specific questions.  There are too many variables and uncertainties in your post for there to be a simple answer.

          There are strict state and federal laws regarding beneficiary designations of certain types of retirement accounts (as well as life insurance, annuities and similar products).  These laws vary from one type of account to another.  Protection from creditors is a whole other question.

           

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          • #6
            I just went into my Vanguard account and added beneficiaries to my taxable brokerage accounts. Check on the right hand of the screen while you are on the IRA beneficiaries page and you will see a link to add beneficiaries to non-retirement accounts.

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            • #7
              I wrote this yesterday after you posted and just saw I didn't hit submit ops: . Apologies if I am repeating what others have advised!

              ~~~~~~~

              You cannot add beneficiaries to a non-retirement account because it is a probate asset that passes through your LW&T. Retirement accounts and life insurance do not pass per the LW&T but per the listed beneficiaries. That is why it is always important to review your beneficiaries periodically to make sure they are current. I'm sure you've heard horror stories about someone not taking an ex-spouse off the IRA or life insurance - can be quite dreadful.

              You can name beneficiaries for TOD accounts, too, but they are not OSFA. You'll need to keep up with beneficiary designations just like for retirement accounts and life insurance. And you should be aware that naming beneficiaries versus heirs does not necessarily have the same financial impact should there be an estate or inheritance tax issue (state or federal). TODs are easy designations, but they should not be substituted for an estate or financial plan, especially for HIPs.

              There are several things to consider when titling your brokerage account. For example, if it is a joint account, when one spouse passes, the surviving spouse will not get a full stepped-up basis. There are also asset protection considerations. otoh, a joint account is much simpler to manage and, if you have adequate umbrella insurance and/or the account is not bit, asset protection may not be a big consideration.

              For this reason and for future changes to your plans, I would recommend beginning a relationship with a new estate planning attorney.
              Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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              • #8
                Thanks for the advice.  Looks like I will be contacting a new Estate Planning Attorney to make sure everything is in order.

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