Transfer on Death Accounts

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goldy18
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Transfer on Death Accounts

Post by goldy18 » Sat May 19, 2018 7:03 pm

I have been following another thread about TOD accounts but don't want to sidetrack that thread so will ask my question here.

I am in the process of transferring a TOD brokerage account from another firm to Vanguard and had planned to have it be a TOD account at Vanguard and can't seem to understand why that would be a bad idea, as it is felt to be in that other thread.. My thoughts were to have it Transfer on Death to my daughter, thus avoiding probate All of my other (checking, savings, CD's, IRA's) accounts are designated as "POD", "co-owner","beneficiary" TOD" .. Can someone help me understand if it would, indeed, be a bad plan to have a taxable brokerage account titled as TOD?

Thank you.

Gill
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Re: Transfer on Death Accounts

Post by Gill » Sat May 19, 2018 7:07 pm

It’s fine if that’s the way you want it. What happens if you are predeceased by your daughter?
Gill

avoidingdumbmistakes
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Re: Transfer on Death Accounts

Post by avoidingdumbmistakes » Sat May 19, 2018 7:13 pm

My mother recently passed after being sick for a long time. The only beneficiaries were me and my sister. We were listed as 50/50 beneficiaries (transfer on death) on her brokerage accounts and the assets transferred directly with no probate. I was also added as joint owner on her checking, savings, and car title so there was no probate to deal with at all. This was all under the advice of an attorney that is a close friend of my family. The house was already in a trust so that transferred with no fanfare either. I didn't have to deal with any court paperwork becuase the estate was under the taxable amount.

The entire process couldnt have been smoother and I'm very thankful becuase it was a very emotional period to put it lightly. I will do the exact same thing for my children if I have the opportunity of time to plan like I did with my mom.

goldy18
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Re: Transfer on Death Accounts

Post by goldy18 » Sat May 19, 2018 7:18 pm

Hmmm - I guess I really don't know. IRA's have secondary beneficiaries but I don't know what would happen with TOD's, POD's or co-accounts. I need to find out. Can brokerage accounts have beneficiaries?

Edit:
Thanks "Avoiding..." That is exactly what I am trying to set up.

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tadamsmar
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Re: Transfer on Death Accounts

Post by tadamsmar » Sat May 19, 2018 7:35 pm

goldy18 wrote:
Sat May 19, 2018 7:03 pm
I have been following another thread about TOD accounts but don't want to sidetrack that thread so will ask my question here.

I am in the process of transferring a TOD brokerage account from another firm to Vanguard and had planned to have it be a TOD account at Vanguard and can't seem to understand why that would be a bad idea, as it is felt to be in that other thread.. My thoughts were to have it Transfer on Death to my daughter, thus avoiding probate All of my other (checking, savings, CD's, IRA's) accounts are designated as "POD", "co-owner","beneficiary" TOD" .. Can someone help me understand if it would, indeed, be a bad plan to have a taxable brokerage account titled as TOD?

Thank you.
What's the other thread?

As far as I know only the only "bad" thing is that the account may get frozen for a short period after death until it gets transferred to the beneficiary. But to avoid that I think you'd need some kind of a trust and most people don't want to go the expense of setting up a trust.

goldy18
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Re: Transfer on Death Accounts

Post by goldy18 » Sat May 19, 2018 7:42 pm

What's the other thread?
viewtopic.php?f=2&t=249453

Big Dog
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Re: Transfer on Death Accounts

Post by Big Dog » Sat May 19, 2018 7:50 pm

As far as I know only the only "bad" thing is that the account may get frozen for a short period after death until it gets transferred to the beneficiary. But to avoid that I think you'd need some kind of a trust and most people don't want to go the expense of setting up a trust.
PoD/ToD are great for simple estates. Vanguard makes that transfer within a couple of days once it receives a certified death certificate. My sister and I were 50;50 beneficiaries on my mom's vanguard taxable account and if I recall, vanguard split the stocks in half and transferred my half within in a week of receiving the death cert. Vanguard even had the correct cost basis upon transfer.


OTOH, IRA's transfer per the beneficiary designation. Again, Vanguard split my mom's IRA 50:50 and moved half to a IRA account in my name and half to my sister. It all went quickly.

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Kenkat
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Re: Transfer on Death Accounts

Post by Kenkat » Sat May 19, 2018 8:09 pm

You can do a TOD on a Vanguard non-retirement account and can designate a primary as well as secondary beneficiaries. One big downside to Vanguard TOD is that you cannot have a TOD on a joint account. Most other companies allow this to cover situations where both joint owners are deceased within a close timeframe.
Last edited by Kenkat on Sat May 19, 2018 8:22 pm, edited 1 time in total.

Gill
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Re: Transfer on Death Accounts

Post by Gill » Sat May 19, 2018 8:18 pm

goldy18 wrote:
Sat May 19, 2018 7:18 pm
Hmmm - I guess I really don't know. IRA's have secondary beneficiaries but I don't know what would happen with TOD's, POD's or co-accounts. I need to find out. Can brokerage accounts have beneficiaries?

Edit:
Thanks "Avoiding..." That is exactly what I am trying to set up.
I think the answer is you need a will to cover this possibility.
Gill

Alan S.
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Re: Transfer on Death Accounts

Post by Alan S. » Sat May 19, 2018 9:22 pm

We have a CPWROS taxable brokerage account with Schwab with a designated beneficiary and a contingent beneficiary. Therefore, if the primary bene pre deceased the last spouse, the funds would go to the contingent. The options are very flexible, for example a contingent beneficiary could be either per capita or per stirpes.

Big Dog
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Re: Transfer on Death Accounts

Post by Big Dog » Sat May 19, 2018 9:29 pm

One big downside to Vanguard TOD is that you cannot have a TOD on a joint account.
The only downside is when both spouses die simultaneously, or within a day or so (or before the first death cert is available). Otherwise, the surviving spouse can name a new ToD/PoD beneficiary.

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Jerry55
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Re: Transfer on Death Accounts

Post by Jerry55 » Sat May 19, 2018 9:34 pm

I have a will, but my investments are all TOD / POD, with a primary (child) and tertiary (Children) I have 3 children.
The youngest is in her mid 20s, the others in their mid-late 30's, and they're designated as per their actions as I have
observed over the past 10-20 yrs. My Will only contains my Savings & Checking account with whom I believe is the MOST
responsible, followed by the other 2, in some order.

If all 3 fail before me, probate court enters, and my sisters come into play accordingly.
I change my will when feasible, but the TOD/POD don't change, unless I do it, outside of my will.

I've looked into this over the past 6 years, and believe it's the best option FOR ME. Everyone is different. YMMV
Retired CSRS on 12/19/2012 @ age 57 w/39 years | Good Bye Tension, Hello Pension !!!

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tadamsmar
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Re: Transfer on Death Accounts

Post by tadamsmar » Sun May 20, 2018 7:56 am

Alan S. wrote:
Sat May 19, 2018 9:22 pm
We have a CPWROS taxable brokerage account with Schwab with a designated beneficiary and a contingent beneficiary. Therefore, if the primary bene pre deceased the last spouse, the funds would go to the contingent. The options are very flexible, for example a contingent beneficiary could be either per capita or per stirpes.
You can do all that for a Vanguard non-retirement account using this form:

https://www.vanguard.com/pdf/bdbp.pdf?2210039149

You can set up secondary beneficiaries with per stirpes.

mptfan
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Re: Transfer on Death Accounts

Post by mptfan » Sun May 20, 2018 7:59 am

avoidingdumbmistakes wrote:
Sat May 19, 2018 7:13 pm
I didn't have to deal with any court paperwork becuase the estate was under the taxable amount.
I don't think you would have had to deal with any court paperwork even if the estate was over the taxable amount. The only difference would have been filling out forms and filing them with the IRS to pay the estate tax.

zeppy
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Re: Transfer on Death Accounts

Post by zeppy » Sun May 20, 2018 11:16 am

mistake

pshonore
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Re: Transfer on Death Accounts

Post by pshonore » Sun May 20, 2018 1:00 pm

mptfan wrote:
Sun May 20, 2018 7:59 am
avoidingdumbmistakes wrote:
Sat May 19, 2018 7:13 pm
I didn't have to deal with any court paperwork becuase the estate was under the taxable amount.
I don't think you would have had to deal with any court paperwork even if the estate was over the taxable amount. The only difference would have been filling out forms and filing them with the IRS to pay the estate tax.
Depends where you live; in CT all estates are subject to a probate fee (in actuality just another state tax). These fees are payable whether assets pass via will, via TOD/POD, RLT etc. These are reduced if passing to a spouse.

As an example:
10K estate= $140
100K = $465
1 Mill = $3115
2 Mill = $5615

aristotelian
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Re: Transfer on Death Accounts

Post by aristotelian » Sun May 20, 2018 1:07 pm

goldy18 wrote:
Sat May 19, 2018 7:42 pm
What's the other thread?
viewtopic.php?f=2&t=249453
I don't see anyone on that thread arguing against setting up accounts to TOD. It appears to be an issue with Wells Fargo in particular.

Alan S.
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Re: Transfer on Death Accounts

Post by Alan S. » Sun May 20, 2018 2:41 pm

tadamsmar wrote:
Sun May 20, 2018 7:56 am
Alan S. wrote:
Sat May 19, 2018 9:22 pm
We have a CPWROS taxable brokerage account with Schwab with a designated beneficiary and a contingent beneficiary. Therefore, if the primary bene pre deceased the last spouse, the funds would go to the contingent. The options are very flexible, for example a contingent beneficiary could be either per capita or per stirpes.
You can do all that for a Vanguard non-retirement account using this form:

https://www.vanguard.com/pdf/bdbp.pdf?2210039149

You can set up secondary beneficiaries with per stirpes.

That is not what the link indicates. It clearly states that CPWROS or joint accounts are not eligible for this form.

avoidingdumbmistakes
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Re: Transfer on Death Accounts

Post by avoidingdumbmistakes » Sun May 20, 2018 3:02 pm

mptfan wrote:
Sun May 20, 2018 7:59 am
avoidingdumbmistakes wrote:
Sat May 19, 2018 7:13 pm
I didn't have to deal with any court paperwork becuase the estate was under the taxable amount.
I don't think you would have had to deal with any court paperwork even if the estate was over the taxable amount. The only difference would have been filling out forms and filing them with the IRS to pay the estate tax.
There are triggers in my state that could force anyone to go through probate/register of wills even if it's just personal property being transferred (orphans court). If the only thing we forgot to do was not add me (or another family member) on a small savings account then the only way I could get access would be to open an estate and be designated as the "official" executor or personal representative. Big pain in the butt to be honest.

We implemented an entire plan to avoid everything all together. If the estate was over the taxable limit I would have had to gone through the entire process because everything would need to be valued and approved in court. Appraisals on real and personal property and full accounting and all that fun stuff. All I have to do is file a final tax return for my mom. Everything else slid under the court process but it took a lot of planning. Small seemingly "dumb" things can trip you up in my state.

avoidingdumbmistakes
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Re: Transfer on Death Accounts

Post by avoidingdumbmistakes » Sun May 20, 2018 3:06 pm

Jerry55 wrote:
Sat May 19, 2018 9:34 pm
I have a will, but my investments are all TOD / POD, with a primary (child) and tertiary (Children) I have 3 children.
The youngest is in her mid 20s, the others in their mid-late 30's, and they're designated as per their actions as I have
observed over the past 10-20 yrs. My Will only contains my Savings & Checking account with whom I believe is the MOST
responsible, followed by the other 2, in some order.

If all 3 fail before me, probate court enters, and my sisters come into play accordingly.
I change my will when feasible, but the TOD/POD don't change, unless I do it, outside of my will.

I've looked into this over the past 6 years, and believe it's the best option FOR ME. Everyone is different. YMMV
I still have 2 minor children and my older ones are only 21 so my wife and I set up a trust in case we both go at the same time. The trust is in place until my youngest kids are 30 years old. We have it set up through Schwab to administer the trust for .25%/year which seems like a very fair deal considering 1) I'm dead and no longer care about my money and 2) I can already see my son buying a yacht for his 20th birthday if he gets the whole wad instantly. LOL

mptfan
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Re: Transfer on Death Accounts

Post by mptfan » Sun May 20, 2018 7:46 pm

avoidingdumbmistakes wrote:
Sun May 20, 2018 3:02 pm
If the estate was over the taxable limit I would have had to gone through the entire process because everything would need to be valued and approved in court.
Are you referring to your state estate tax as opposed to the federal estate tax?

mptfan
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Re: Transfer on Death Accounts

Post by mptfan » Sun May 20, 2018 7:48 pm

pshonore wrote:
Sun May 20, 2018 1:00 pm
Depends where you live; in CT all estates are subject to a probate fee (in actuality just another state tax). These fees are payable whether assets pass via will, via TOD/POD, RLT etc. These are reduced if passing to a spouse.
Being "subject to a probate fee" is not the same thing as being required to go through the court probate process.

avoidingdumbmistakes
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Re: Transfer on Death Accounts

Post by avoidingdumbmistakes » Sun May 20, 2018 7:51 pm

mptfan wrote:
Sun May 20, 2018 7:46 pm
avoidingdumbmistakes wrote:
Sun May 20, 2018 3:02 pm
If the estate was over the taxable limit I would have had to gone through the entire process because everything would need to be valued and approved in court.
Are you referring to your state estate tax as opposed to the federal estate tax?

Yes, but thankfully my state now matches the federal exemption. That wasn't always the case. Back in 09 my state limited exemptions to $1M or less.

mptfan
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Re: Transfer on Death Accounts

Post by mptfan » Sun May 20, 2018 8:11 pm

avoidingdumbmistakes wrote:
Sun May 20, 2018 7:51 pm
Yes, but thankfully my state now matches the federal exemption. That wasn't always the case. Back in 09 my state limited exemptions to $1M or less.
I can't speak for your state law, but I would be very surprised if your state required you as a matter of law to go through the probate process for estates over the exemption. Requiring the payment of tax is something different.

Gill
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Re: Transfer on Death Accounts

Post by Gill » Sun May 20, 2018 8:34 pm

mptfan wrote:
Sun May 20, 2018 8:11 pm
avoidingdumbmistakes wrote:
Sun May 20, 2018 7:51 pm
Yes, but thankfully my state now matches the federal exemption. That wasn't always the case. Back in 09 my state limited exemptions to $1M or less.
I can't speak for your state law, but I would be very surprised if your state required you as a matter of law to go through the probate process for estates over the exemption. Requiring the payment of tax is something different.
State inheritance or estate tax is a different matter than probating a will. Although there are usually fees involved when a will is probated, the gross estate for estate tax purposes is unrelated. Mptfan, you are correct.
Gill

goldy18
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Re: Transfer on Death Accounts

Post by goldy18 » Mon May 21, 2018 2:05 pm

I have learned from and appreciate all of the comments in this thread. I called Vanguard and requested them to send me one of the TOD Plan Kit forms and will submit it along with my application for a new brokerage account.

Just curious - What is the difference in Pay on Death vs Transfer on Death?

Thanks to all for taking the time to give your thoughts/suggestions/opinions.

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Jerry55
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Re: Transfer on Death Accounts

Post by Jerry55 » Tue May 22, 2018 12:02 am

goldy18 wrote:
Mon May 21, 2018 2:05 pm
Just curious - What is the difference in Pay on Death vs Transfer on Death?

They're basically the same thing. Scottrade, now TD Ameritrade is TOD.
I can't remember which, but Vanguard and Dodge & Cox are POD, I THINK.
I know I have either/or at those three accts
Retired CSRS on 12/19/2012 @ age 57 w/39 years | Good Bye Tension, Hello Pension !!!

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Jerry55
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Re: Transfer on Death Accounts

Post by Jerry55 » Tue May 22, 2018 12:09 am

avoidingdumbmistakes wrote:
Sun May 20, 2018 3:06 pm
2) I can already see my son buying a yacht for his 20th birthday if he gets the whole wad instantly. LOL
I didn't want to say it, buy my 34 year old son is close to being that way, and am still considering a Trust similar to your choice.
SMART !!!
He wanted to go to college and TOLD me to sign here, and that's when I told him that college is a dialog, not a monologue.
Well, he racked up BIG BUCKS coz his mom (my ex, ran and signed every paper he wanted her to sign), and now they're in debt.

I'm letting them suffer thru the consequences for the past 8 years, and am keeping an eye on the situation, with your choice in mind.
Even when they get older, ya gotta keep an eye on their behavior. :sharebeer
Retired CSRS on 12/19/2012 @ age 57 w/39 years | Good Bye Tension, Hello Pension !!!

avoidingdumbmistakes
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Re: Transfer on Death Accounts

Post by avoidingdumbmistakes » Tue May 22, 2018 8:25 am

Jerry55 wrote:
Tue May 22, 2018 12:09 am
I didn't want to say it, buy my 34 year old son is close to being that way, and am still considering a Trust similar to your choice.
SMART !!!
He wanted to go to college and TOLD me to sign here, and that's when I told him that college is a dialog, not a monologue.
Well, he racked up BIG BUCKS coz his mom (my ex, ran and signed every paper he wanted her to sign), and now they're in debt.

I'm letting them suffer thru the consequences for the past 8 years, and am keeping an eye on the situation, with your choice in mind.
Even when they get older, ya gotta keep an eye on their behavior. :sharebeer
Ha! I'm not a walking pile of money but if my wife and I were to go right now, each of my 4 kids would inherit at least over $500k each. When doing the trust (and thinking it through) much of my decision making was based on reflecting back to myself when I was 20-30 years old. Life was carefree and fun back then and a big inheritance would = an even bigger party. haha

I don't have any family members I could trust to administer a trust or I would have picked one of them instead of a fee based with Schwab. Thinking it through even further though... a fee based trust is probably the best way to go all the way around. Taxing a family member with the duties of administering a trust isn't as easy as balancing a checkbook.

Of course the biggest thing I'm hoping for is that no trust administration is ever needed. I'd like to think I can squeeze out 20 years of work free easygoing life before the health wheels start coming off. Planning for not making it isn't the most fun exercise to go through but I'm glad the wife and I put it all together well in advance.

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