Beneficiaries/TOD for Vanguard Joint Account

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deeppizza
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Beneficiaries/TOD for Vanguard Joint Account

Post by deeppizza »

[2017 thread bumped in 2022 --admin LadyGeek]

I tried to add beneficiaries or assign TOD to our Vanguard joint account, but was told that they don't allow beneficiaries with joint accounts, and that the account defaults to the survivor if one of the account owners dies. But my question is what happens if both owners die; I assume that it has to go through probate to the estate, which is something we would want to obviously avoid. When I told our estate lawyer this, she was surprised that Vanguard doesn't allow beneficiaries with joint accounts (as most other brokerages do), and suggested that we change the account ownership to our trust (which has us as co-trustees, with beneficiaries as children).

Has anyone else had to deal with this?
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dm200
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Re: Beneficiaries/TOD for Vanguard Joint Account

Post by dm200 »

deeppizza wrote:I tried to add beneficiaries or assign TOD to our Vanguard joint account, but was told that they don't allow beneficiaries with joint accounts, and that the account defaults to the survivor if one of the account owners dies. But my question is what happens if both owners die; I assume that it has to go through probate to the estate, which is something we would want to obviously avoid. When I told our estate lawyer this, she was surprised that Vanguard doesn't allow beneficiaries with joint accounts (as most other brokerages do), and suggested that we change the account ownership to our trust (which has us as co-trustees, with beneficiaries as children).
Has anyone else had to deal with this?
No experience with Vanguard. I believe that this restriction is a choice that Vanguard has made.
There are probably supportable reason(s) Vanguard has made this choice.
I know that (in Virginia) bank and credit union accounts can be joint (with survivorship) and that such joint accounts can have a POD (similar to TOD) beneficiary. In that case, if joint owner dies, the balance goes to the other joint owner. Then if/when that owner dies, it goes to the POD beneficiary,
dcdowden
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Re: Beneficiaries/TOD for Vanguard Joint Account

Post by dcdowden »

I had noticed this restriction before as well. But our Vanguard assets are now in Trust Accounts, so it doesn't matter for us anymore.
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HueyLD
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Re: Beneficiaries/TOD for Vanguard Joint Account

Post by HueyLD »

deeppizza wrote:I tried to add beneficiaries or assign TOD to our Vanguard joint account, but was told that they don't allow beneficiaries with joint accounts, and that the account defaults to the survivor if one of the account owners dies. But my question is what happens if both owners die; I assume that it has to go through probate to the estate, which is something we would want to obviously avoid. When I told our estate lawyer this, she was surprised that Vanguard doesn't allow beneficiaries with joint accounts (as most other brokerages do), and suggested that we change the account ownership to our trust (which has us as co-trustees, with beneficiaries as children).

Has anyone else had to deal with this?
Unfortunately, Vanguard has chosen that route.

You can move your joint accounts to another brokerage, or transfer your joint accounts to a trust account at Vanguard if you want the TOD option as specified in the trust document.
Alan S.
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Re: Beneficiaries/TOD for Vanguard Joint Account

Post by Alan S. »

Have accounts at both Schwab and TRP titled as CPWROS with designated beneficiaries added as a normal client request.

Schwab uses a "Designated Beneficiary" Form that kicks in 120 hours after the death of the second spouse.
TRP uses a POD Form with no survival period after death of second spouse.

Several years back I had a 30 day survival period with IRA beneficiary, but VG required that the survival period be dropped. In some cases, I hear that Flagship clients may be able to negotiate these restrictions in some cases.
letsgobobby
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Re: Beneficiaries/TOD for Vanguard Joint Account

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HueyLD
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Re: Beneficiaries/TOD for Vanguard Joint Account

Post by HueyLD »

letsgobobby wrote:what is involved in moving jointly held taxable assets at VG to a trust?
It will be a slow process.

First, you need to have a trust set up.

Second, call vanguard and ask which form(s) you need to fill out. There are different forms for brokerage vs. MF only accounts.

Medallion sig. gty. may be required. However, you may be able to use their voice recognition system ILO MSG.

A few forms will need to be redone. Examples include agent authorization, bank accounts relationships (maybe), etc. You may need to deal with unexpected div/cap gain reinvestment because the change will likely revert to reinvestment. Hopefully all cost basis methods and lots will transfer without any problem. However, in light of numerous problems published here and elsewhere, you must be vigilant and save all your cost basis info and everything else in your account setting so that you can fix their mistakes should it become necessary.

And it will require a lot of patience and understanding on your part.

Good luck.
letsgobobby
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Re: Beneficiaries/TOD for Vanguard Joint Account

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dm200
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Re: Beneficiaries/TOD for Vanguard Joint Account

Post by dm200 »

It seems to me that switching from Vanguard only for this reason is rather silly. Handle the issue in your will(s) or trust(s) - OR leave the account in one name only with a beneficiary/TOD, PoA or a commbination.
Broken Man 1999
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Re: Beneficiaries/TOD for Vanguard Joint Account

Post by Broken Man 1999 »

I just checked our joint taxable account, and I have "primary" beneficiary (wife), and "secondary" beneficiaies ( our daughters).

Not sure why you can't set it up.

Vanguard does state you don't need beneficiaries for joint account, but I have them.

Very odd.

Broken Man 1999
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HueyLD
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Re: Beneficiaries/TOD for Vanguard Joint Account

Post by HueyLD »

letsgobobby wrote:This is not a taxable event, correct?
Correct provided that the owners of the joint account are the same as the trustors of the trust.
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HueyLD
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Re: Beneficiaries/TOD for Vanguard Joint Account

Post by HueyLD »

Broken Man 1999 wrote:I just checked our joint taxable account, and I have "primary" beneficiary (wife), and "secondary" beneficiaies ( our daughters).

Not sure why you can't set it up.

Vanguard does state you don't need beneficiaries for joint account, but I have them.
Very interesting. Is your account very old and grandfathered in?
markcoop
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Re: Beneficiaries/TOD for Vanguard Joint Account

Post by markcoop »

I may be wrong, but I think Vanguard used to allow you to do it (I have it set up), but at some point changed their policy.
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Re: Beneficiaries/TOD for Vanguard Joint Account

Post by Broken Man 1999 »

OP, try this:

From your home page, select "My Accounts", then "Account Maintenance", then under "Personal Profile" heading select "Beneficiaries", under "Beneficiary Information" you can select "Retirement", "Nonretirement" and "Annuity."

I select "Nonretirement" and a screen opens showing me my current beneficiaries, "Primary" and "Secondary"

Broken Man 1999

PS: This account was set up in the early 2000s, FWIT.
“If I cannot drink Bourbon and smoke cigars in Heaven then I shall not go." - Mark Twain
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hornet96
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Re: Beneficiaries/TOD for Vanguard Joint Account

Post by hornet96 »

Broken Man 1999 wrote:OP, try this:

From your home page, select "My Accounts", then "Account Maintenance", then under "Personal Profile" heading select "Beneficiaries", under "Beneficiary Information" you can select "Retirement", "Nonretirement" and "Annuity."

I select "Nonretirement" and a screen opens showing me my current beneficiaries, "Primary" and "Secondary"

Broken Man 1999

PS: This account was set up in the early 2000s, FWIT.
I just looked, and this screen only shows me options to change beneficiaries for my IRA accounts. Our joint account does not appear here (nor do any options to view "retirement" or "non-retirement" accounts).
bsteiner
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Re: Beneficiaries/TOD for Vanguard Joint Account

Post by bsteiner »

deeppizza wrote:I tried to add beneficiaries or assign TOD to our Vanguard joint account, but was told that they don't allow beneficiaries with joint accounts, and that the account defaults to the survivor if one of the account owners dies. But my question is what happens if both owners die; I assume that it has to go through probate to the estate, which is something we would want to obviously avoid. When I told our estate lawyer this, she was surprised that Vanguard doesn't allow beneficiaries with joint accounts (as most other brokerages do), and suggested that we change the account ownership to our trust (which has us as co-trustees, with beneficiaries as children). ...
Since you said "our trust," you're probably in California, since a single revocable trust for a couple is a community property concept, and California is the community property state where revocable trusts are commonly used. If that's the case, your revocable trust would probably hold your taxable accounts.

However, for many people, TOD designations for taxable accounts run the risk of destroying their estate plan. TOD designations make it more difficult for executors to pay debts, expenses and taxes. TOD designations may result in there not being enough money in the estate to pay cash bequests. Our clients generally provide for their children in trust rather than outright, and TOD designations to the children defeat the protection of providing for them in trust rather than outright.
Notnow
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Re: Beneficiaries/TOD for Vanguard Joint Account

Post by Notnow »

I'm curious what you think are the benefits of a joint Vanguard account rather then dividing the funds 50/50 into two individual accounts to put beneficiary names on them ?
RudyS
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Re: Beneficiaries/TOD for Vanguard Joint Account

Post by RudyS »

Broken Man 1999 wrote: Tue Apr 04, 2017 9:58 am I just checked our joint taxable account, and I have "primary" beneficiary (wife), and "secondary" beneficiaies ( our daughters).

Not sure why you can't set it up.

Vanguard does state you don't need beneficiaries for joint account, but I have them.

Very odd.

Broken Man 1999
This used to be the case; a number of years ago Vanguard made the change. I'm grandfathered into the old way. As far as I know, Fidelity doesn't have this stupid requirement.
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Re: Beneficiaries/TOD for Vanguard Joint Account

Post by Big Dog »

Our clients generally provide for their children in trust rather than outright, and TOD designations to the children defeat the protection of providing for them in trust rather than outright.
Just out of curiosity, what "protection" does a trust have for kids over TOD/PoD (which is instant ownership if they are the named beneficiaries)?

(California resident, community property account at Vanguard.)
I'm curious what you think are the benefits of a joint Vanguard account rather then dividing the funds 50/50 into two individual accounts to put beneficiary names on them ?
Stepped up basis on 100% of community property upon the death of the first spouse? (Of course, complications may arise with ToD/PoD if both die simultaneously.)
fourwheelcycle
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Re: Beneficiaries/TOD for Vanguard Joint Account

Post by fourwheelcycle »

deeppizza wrote: Mon Apr 03, 2017 4:13 pm Has anyone else had to deal with this?
I just happened to see your thread. I guess I missed it earlier.

My wife and I went through this situation with Vanguard last year. When my father asked me to become active in managing his finances as his POA (and Executor) I moved everything to Vanguard and set it up as TOD in equal shares to his children, per his Will. I did this partly to speed up the distribution process when he dies, but also to reduce the demands on me to take his Will through probate in his state, 1,000 miles away from my home. My father has now sold his home and moved to a retirement community, so all of his assets are at Vanguard except for his local bank account and an online savings account, for which I am a secondary joint owner.

When I got done I realized TOD was so slick I wanted to do the same with or own savings. When I looked into it I realized Vanguard won't allow TOD on joint accounts, and our Executor son would still have to take our house through probate if we die before we sell it and move to a CCRC, as we plan to do. Vanguard's TOD policy, plus the ability to title our house to a trust in our state, led my wife and I to elect a joint revocable trust.

Once we set up our JRT Vanguard readily helped us move our taxable savings to our new joint trust account. Now our Executor and Successor Trustee son will be able to step in immediately after the second of us dies and move his and his brother's equal shares of our joint trust account, with stepped up basis, into their Vanguard accounts. Our retirement funds are set up with each other as primary beneficiaries and our sons as secondary beneficiaries.

The whole process was very easy to accomplish. Many people on this forum advise that joint revocable trusts are only for community property states. However, I value streamlined estate settlement and the avoidance of even "simple" probate court procedures, especially when my wife and I live in New England and our Executor son currently lives in California.

I wonder if our son and his wife realize they are now in a community property state!
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Re: Beneficiaries/TOD for Vanguard Joint Account

Post by PinotGris »

All our accounts are with Vanguard and all our Vanguard taxable accounts are in my name.We did this when we realized you cannot do TOD and it seemed simpler than doing a trust. We are also 12 years apart, he is older. If he survives me he will inherit outside of probate. If we both die it will be paid out in equal shares to our children outside of probate.

Edited to add: Our wills state we each leave all our assets to our spouse.
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PinotGris
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Re: Beneficiaries/TOD for Vanguard Joint Account

Post by PinotGris »

Broken Man 1999 wrote: Tue Apr 04, 2017 9:58 am I just checked our joint taxable account, and I have "primary" beneficiary (wife), and "secondary" beneficiaies ( our daughters).

Not sure why you can't set it up.

Vanguard does state you don't need beneficiaries for joint account, but I have them.

Very odd.

Broken Man 1999
After posting here I went back to the site and checked. The non-retirement account (taxable account a term Vanguard doesn't seem to use) has beneficiaries now - Spouse as primary and children as secondary. I am so confused. what happened to the TOD? On another space where they explain beneficiaries the TOD has no link. I have sent a message to my Rep.
Alan S.
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Re: Beneficiaries/TOD for Vanguard Joint Account

Post by Alan S. »

Most firms DO offer beneficiaries on joint taxable accounts. Not sure why VG will not. We personally have had these on 3 different accounts recently including Schwab, Oppenheimer, and T Rowe Price. Also on beneficiary deed on real estate allowed in our state.

But these firms may refer to these forms by different names. Some use TOD and others use "designated beneficiary" or similar. They operate in the same manner, ie. when the first spouses passes the account changes to an individual account for the surviving spouse. Then when the surviving spouse passes the named beneficiary or TOD receives the account, all outside of probate. This alleviates the pressure on the surviving spouse to act quickly in a time of extreme stress.

Vanguard has a history of more restrictive beneficiary options than other firms. I guess they must think there is some litigation exposure or processing costs by offering these options.
fourwheelcycle
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Re: Beneficiaries/TOD for Vanguard Joint Account

Post by fourwheelcycle »

Several posts above raise the question of whether Vanguard currently does or does not allow TOD or beneficiary designations for joint non-retirement accounts. I just looked at Vanguard and found two applicable URLs.

The first, https://investor.vanguard.com/beneficia ... nt?lang=en, offers advice on wills, trusts, and TOD designations as alternative means of designating beneficiaries for non-retirement accounts. It references joint accounts and says joint accounts pass to the remaining owner when one owner dies.

The second, https://www.vanguard.com/pdf/bdbp.pdf?2210039149, is Vanguard's Transfer on Death Plan Kit. It specifically says "Only nonretirement accounts registered to an individual may be enrolled in the plan; you can’t establish a plan for joint accounts not already enrolled" in Vanguard's Transfer on Death plan.

From these references, I would say Vanguard currently does not allow new TOD designations for joint non-retirement accounts, but does allow previously established TOD designations to be continued or modified.

In any event, other posts on Bogleheads and elsewhere note that TOD is a rather blunt means for directing the disposition of assets. TOD offers the benefit of avoiding probate but lacks the ability of wills and trusts to provide specific provisions for a range of potential contingencies.
DrGoogle2017
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Re: Beneficiaries/TOD for Vanguard Joint Account

Post by DrGoogle2017 »

What the TOD does not address is what if the whole family dies. I believe, the trust provides names of my brother or my husband's sister for our half of the estate.
Notnow
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Re: Beneficiaries/TOD for Vanguard Joint Account

Post by Notnow »

DrGoogle2017 wrote: Wed Aug 23, 2017 10:10 am What the TOD does not address is what if the whole family dies. I believe, the trust provides names of my brother or my husband's sister for our half of the estate.
Couldn't you put them as secondary beneficiaries (TOD) which would only take effect if all the primaries (the whole family) dies ?
DrGoogle2017
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Re: Beneficiaries/TOD for Vanguard Joint Account

Post by DrGoogle2017 »

Notnow wrote: Thu Aug 31, 2017 5:25 pm
DrGoogle2017 wrote: Wed Aug 23, 2017 10:10 am What the TOD does not address is what if the whole family dies. I believe, the trust provides names of my brother or my husband's sister for our half of the estate.
Couldn't you put them as secondary beneficiaries (TOD) which would only take effect if all the primaries (the whole family) dies ?
Maybe, I didn't think about it because I've already have a trust. But what about real estate?
Notnow
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Re: Beneficiaries/TOD for Vanguard Joint Account

Post by Notnow »

[/quote]
But what about real estate?
[/quote]

I did a lady bird life estate deed. Property 100% mine until death (no probate). Not all States offer this simple solution and some see the lack of privacy before death as a downside (deed is recorded). A Trust is private but many people end up submitting the Trust into probate to speed up the creditors window for claims - which defeats the Trust privacy purpose, might as well just had a Will (which can address added issues who will take care of kids)... In Florida probate - creditors have 3 months., without probate, a Trust is open to claims for 2 years., Also in Florida -creditors cannot claim on your primary homesteaded property. SO maybe no worries waiting 2 years with a Trust that ONLY contains the property in FL.. Put beneficiaries names on everything else to avoid trouble.

I saw no downside to splitting the Vanguard fund to individual accounts with each other as beneficiary. BUT as someone above mentioned, there might be consequences in a community state ?? IDK cause Florida isn't

PS Having gone thru probate twice, my tip is beware of attorneys wanting a percentage of Estate... I used excellent attorney for flat fee $1700 . Paperwork the same whether estate is 100k or 1 mil.
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Re: Beneficiaries/TOD for Vanguard Joint Account

Post by Amanda999 »

Notnow wrote: Fri Sep 01, 2017 4:00 am
...I saw no downside to splitting the Vanguard fund to individual accounts with each other as beneficiary....
[/quote]

The downside for me is the loss of the 50% step up in basis upon death of first spouse.

I called VG today, and they confirmed that they do not permit naming beneficiaries on nonretirement joint accounts. I was transferred to a benefs. specialist (I wanted a 2nd opinion, as this was surprising to me.) The specialist said it was because states vary as to laws upon simultaneous death, among other scenarios. I then called Schwab and Fidelity: both permit it. Pretty clear its a cost saving measure for VG, to not deal with it.
Notnow
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Re: Beneficiaries/TOD for Vanguard Joint Account

Post by Notnow »

[/quote]

The downside for me is the loss of the 50% step up in basis upon death of first spouse.
[/quote]

My understanding is that inherited funds aren't taxable for estates under 5 million, so I would get full step up basis on date of death, and only pay capital gains from that date. Am I missing a scenario? If you're dealing with over 5 mil, I guess that's a whole different ballgame...and I'm jealous!
notthatdumb
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Re: Beneficiaries/TOD for Vanguard Joint Account

Post by notthatdumb »

There are actually two problems at Vanguard with respect to TODs.
1. They just don't permit them at all on joint accounts.
2. On individual accounts (if you are thinking of converting as the solution), the don't permit a per stirpes beneficiary designation.

The only way around this while staying at Vanguard is to set up a trust providing for per stirpes distribution, and then either 1) Put the Vanguard joint account assets into a Vanguard Trust Account; or, 2) convert the Vanguard Joint Account into one or two Vanguard individual accounts, and make the Trust the secondary beneficiary (with the spouse as the primary).

You will just make yourselves the trustees, and go about administering the account as you had done your Joint Account. Since it is classified by the IRS as a Grantor Trust, you get to use your own SS# on the account, and go on reporting your capital gains on your own 1040 when you sell shares. Easy, right? Or is it? And a trust is better than a TOD, anyway, for various cliches stated. Or is it?

It is disconcerting to see the casual attitude displayed by a number of these posts, which seem to reflect a blithe believe that this is a simple question with a simple solution: one writer concludes that Vanguard's prohibition of a TOD in a joint account is no reason to transfer the account's assets to a rival institution.

Given the complexity of trust law and federal taxation of trusts, your general practice attorney will probably not be competent to draft your trust. The specialists who are, have spent years learning their craft, and charge fees corresponding to their higher expertise. Do you expect to get out of their office for less than $2,000 or $3,000? Do you have $2,000 or $3,000 that you don't need, or don't want to leave to your heirs? That's just for starters.

You are going to do this now, thinking that by doing so, you will settle the matter for life. Will you, really? Do you know everything that might happen to you or your spouse over, say, the next 20 years?

Suppose you need to withdraw money from your account from time to time, for your nursing home costs (which will skyrocket when you suffer dementia). Who is going to get your money out of your Vanguard Trust Account to pay for your expenses after the trustee (you) loses his mental capacity to act to administer the trust? Your POA, listed on your Vanguard Agent Authorization form? Did you know that the Vanguard AA form is no good for a Trust Account?

You'll have to have had your trust attorney, when you first had it drafted, 10 or 20 years prior, write it to provide that a successor trustee be substituted for you on some criterion such as a doctor's written opinion letter, stating—just exactly what? Did you think of that 20 years ago? Maybe your $300-$500 per hour attorney did.

But what happens if your successor trustee dies before you do? Did you think of that and provide for it in your trust? You had better have listed a whole list of successor trustees, enough to provide for as many deaths as might occur over your 20 year life expectantcy, short of a nuclear war, in which case, who cares?

Now just exactly who are all these successor trustees going to be?
Well most people would just choose persons they trust completely, like their children.
But wait: aren't they your beneficiaries?
Making a beneficiary a trustee disqualifies the trust as a Grantor Trust under IRS rules, and the trust then has to file a tax return (form 1041) in its own name, reporting its income; the grantor no longer gets to do so.

How much is it going to cost the trustee (who probably can't do it himself) to hire a tax accountant to prepare the return? $300? $400? $500?
Every year for the rest of your life?

OK, don't make your beneficiary the successor trustee?
Then all you have to do is hire a disinterested third party to be your trustee. Maybe the attorney who drafted your trust. He now becomes in complete control of your assets. Did you just meet this guy and have you already developed that much confidence in him? And what if he dies before you do? Is somebody going to have to go to court for you to get somebody else appointed as trustee of your trust?

Not so easy to draft a trust providing for so many contingencies? Are you sure you really need this trust (i.e., for anything other than just to evade the obstacles to your wishes that Vanguard has put for you by its TOD restrictions?

So just go with the Individual Account, with the Trust as the secondary beneficiary, right?
Do you need one trust, with two grantors? Or two, splitting the joint account in half, with reciprocal beneficiary provisions between you and your spouse?

Going with just one account will require the one spouse to remove himself or herself from the account. Do you know there are no tax consequences to that? Maybe there aren't. But you sure better consult a tax expert first. How much is that going to cost you? And what if he's wrong!? Better get a good one.

But if its all OK that way, you will still have to pay the attorney who drafts the trust which you will name as the secondary beneficiary of your TOD. We have seen how much that will cost. And your successors will still have to pay a tax accountant for preparation of at least one year's tax return, because it will have to be under the Trust's TIN, not yours, and not the beneficiaries' SS#. It won't be a simple return; it requires the Form 1041, perhaps a Schedule D and supporting Form 89xx, and a Form K-1 to notify the beneficiaries of their share of the trust's income.

The trustee and the tax accountant are certainly both going to charge for their services, or at least the accountant. How much do you think that will be? (When he sees how much wealth you have left).

And some of the contingencies addressed above regarding trustees, and dementia of a trustee, may apply, 20 years later, to the person or persons you named as trustees. And how do you know if any of them are still going to be alive in 20 years?

Oh beautiful and simple TODs!
Automatic transfer of wealth. Beneficiaries report everything on their own tax returns.

The following institutions offer TODs on Joint Accounts, Per Stirpes (and maybe others do, too):
TIAA, Fidelity, Schwab, Well Fargo.
Notnow
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Re: Beneficiaries/TOD for Vanguard Joint Account

Post by Notnow »

Excellent post above. Thank you for your insight.
Hurricane99
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Re: Beneficiaries/TOD for Vanguard Joint Account

Post by Hurricane99 »

After finally establishing an estate plan with our attorney and naming Vanguard as our successor trustee we hit this road block with Vanguard. They still will not allow a beneficiary on a joint account. I've spent weeks working with our Flagship rep and escalating the problem only to hear the same response again and again. Vanguard removed the capability to add a beneficiary to a joint account several years ago and are considering allowing it again in the future. My rep says it can't be escalated any higher.

I've considered changing the account ownership to myself with a TOD to my wife and the trust as a beneficiary. This is possible but means I must have a new account with Vanguard and lose all the account history unless I also keep the original account open with a small balance. Plus, I track everything in Quicken and performance data from our many years of investing with Vanguard would no longer be accurate.

Is there a good workaround for this problem? Vanguard is the only financial firm that we deal with that has this limitation. We also have a Fidelity account and there was no problem making the changes. I'm considering these options:

Name our trust as the owner of the Vanguard brokerage account
Convert joint Vanguard account to a single owner TOD and the trust as a secondary beneficiary
Move Vanguard taxable investments to Fidelity

Thank you for your suggestions.
DisplacedHoosier
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Re: Beneficiaries/TOD for Vanguard Joint Account

Post by DisplacedHoosier »

Anyone cross this bridge successfully? :confused

Asking because wife and I also have a Vanguard Brokerage Account with Joint Ownership (JT TEN WROS). Can't add beneficiaries online like many of you. We're currently finalizing our Revocable Living Trust with our Attorney this week and looking for the most efficient way to address this issue in finalizing the trust.

Appreciate any guidance from this informed audience. Is it best to re-title the account to the trust name? What implications on basis step-up are there in this method, if any? Other options?

Thanks in advance for your input!
Danw
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Re: Beneficiaries/TOD for Vanguard Joint Account

Post by Danw »

I have an old joint account with TOD. Can I keep this if I “upgrade” to a brokerage platform.
bayview
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Re: Beneficiaries/TOD for Vanguard Joint Account

Post by bayview »

Danw wrote: Sun Jun 23, 2019 4:43 pm I have an old joint account with TOD. Can I keep this if I “upgrade” to a brokerage platform.
Wow, I have to say that I would be scared witless to do this if the TOD option were important. I certainly wouldn’t rely on anything the CSRs told me. :(
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joer1212
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Re: Beneficiaries/TOD for Vanguard Joint Account

Post by joer1212 »

My parents placed 100k in Vanguard's money market account, waiting for the 'right' time to invest in Wellesley fund. Upon hearing this 'no beneficiaries in joint taxable accounts' business, my parents decided to immediately withdraw the cash and deposit it back into their savings account. That's what Vanguard gets for imposing idiotic, counterproductive policies.
rivercrosser
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Re: Beneficiaries/TOD for Vanguard Joint Account

Post by rivercrosser »

Ran into the same issue with Vanguard several years back with our taxable account. What I did was just put the account in my name with wife as 100% primary beneficiary and our two grown children secondary 50% each. Money we had in that account would not have been needed that quick and if something happened to me it would go straight to her anyway. I realize some couples may not be comfortable with doing it that way but we have been together over forty years and have no secrets with our money.
dadu007
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Re: Beneficiaries/TOD for Vanguard Joint Account

Post by dadu007 »

Signed the paperwork for our revocable trust(s) today.
After dinner, signed in to Schwab to make the appropriate beneficiary changes, which was easily done (aside from the limited character length where you enter the name of the trust; I have to double-check with our lawyer on the abbreviation I had to use...)
Then logged into Vanguard, where we a have a small Joint Account WROS account.
As everyone in the same situation above has found, you can't add beneficiaries to a joint account at Vanguard.
Stupid or lazy on their part, I'm not sure.
I will be transferring out assets or cashing out of the Vanguard account before closing it.
increment
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Re: Beneficiaries/TOD for Vanguard Joint Account

Post by increment »

dadu007 wrote: Tue Oct 05, 2021 8:56 pm Signed the paperwork for our revocable trust(s) today.

[...]

Then logged into Vanguard, where we a have a small Joint Account WROS account.
As everyone in the same situation above has found, you can't add beneficiaries to a joint account at Vanguard.
So you wanted to make your revocable trust the beneficiary, rather than the owner now, of the account?
alex_686
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Re: Beneficiaries/TOD for Vanguard Joint Account

Post by alex_686 »

dadu007 wrote: Tue Oct 05, 2021 8:56 pm Stupid or lazy on their part, I'm not sure.
I personally think it is smart. I have seen lawyers debate if joint accounts can have a beneficiary. Or how it would ever be triggered.

Having worked this issue from the brokerage side, I am glad that Vanguard is not spending my expense ratio on this complex issue that normally involves toxic relatives whole love to sue.

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Danw
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Re: Beneficiaries/TOD for Vanguard Joint Account

Post by Danw »

Danw wrote: Sun Jun 23, 2019 4:43 pm I have an old joint account with TOD. Can I keep this if I “upgrade” to a brokerage platform.

It seems that if one has dividends from one fund automatically invested in a different fund the website will find you ineligible to upgrade and they won’t bother you with emails etc.
Last edited by Danw on Wed Oct 06, 2021 7:22 pm, edited 1 time in total.
dadu007
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Re: Beneficiaries/TOD for Vanguard Joint Account

Post by dadu007 »

increment wrote: Tue Oct 05, 2021 9:13 pm So you wanted to make your revocable trust the beneficiary, rather than the owner now, of the account?
Correct. I just paid several thousand dollars to set up our trust. I'm not going to jump through MORE hoops with Vanguard and do MORE paperwork to change the account to a trust account.
I slept on it, and I'm cashing out the account today. It's only about $13000 of our (low) seven-figure portfolio.
Not worth the effort!
SpideyIndexer
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Re: Beneficiaries/TOD for Vanguard Joint Account

Post by SpideyIndexer »

Amanda999 wrote: Tue Oct 03, 2017 4:09 pm
Notnow wrote: Fri Sep 01, 2017 4:00 am
...I saw no downside to splitting the Vanguard fund to individual accounts with each other as beneficiary....
The downside for me is the loss of the 50% step up in basis upon death of first spouse.
[/quote]

An old thread, but am trying to understand the comment above. With separate accounts, when spouse 1 dies and spouse 2 is the beneficiary, is there no step-up in basis for spouse 2?

If yes, is this only true for spouses? I have found other comments that beneficiaries in TOD accounts get the step-up in basis.
Broken Man 1999
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Re: Beneficiaries/TOD for Vanguard Joint Account

Post by Broken Man 1999 »

bayview wrote: Sun Jun 23, 2019 4:55 pm
Danw wrote: Sun Jun 23, 2019 4:43 pm I have an old joint account with TOD. Can I keep this if I “upgrade” to a brokerage platform.
Wow, I have to say that I would be scared witless to do this if the TOD option were important. I certainly wouldn’t rely on anything the CSRs told me. :(
Our joint account, indeed all Vanguard accounts were moved to the brokerage platform and our beneficiaries followed, no changes. Our Flagship guy changed everything for us via a phone call, and ensured our beneficiaries remained as they were.

Though, our joint account is virtually empty, $31.84 total.

Perhaps when we have RMDs we will have leftover funds after expenses, and can throw some $$$ into the taxable account. For now, nothing going there.

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven then I shall not go." - Mark Twain
sycamore
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Re: Beneficiaries/TOD for Vanguard Joint Account

Post by sycamore »

SpideyIndexer wrote: Wed Oct 06, 2021 3:25 pm
Amanda999 wrote: Tue Oct 03, 2017 4:09 pm
Notnow wrote: Fri Sep 01, 2017 4:00 am ...I saw no downside to splitting the Vanguard fund to individual accounts with each other as beneficiary....
The downside for me is the loss of the 50% step up in basis upon death of first spouse.
An old thread, but am trying to understand the comment above. With separate accounts, when spouse 1 dies and spouse 2 is the beneficiary, is there no step-up in basis for spouse 2?

If yes, is this only true for spouses? I have found other comments that beneficiaries in TOD accounts get the step-up in basis.
I'm no expert but I think it depends on whether you live in a community property state.
See https://www.bogleheads.org/wiki/Step-up_in_basis

If you don't live in a community property state and you & spouse have a joint account, the step-up only happens for the deceased's half.

[Edited to fix quoting]
drzzzzz
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Re: Beneficiaries/TOD for Vanguard Joint Account

Post by drzzzzz »

How does step up basis work with a brokerage account that is in a revocable trust when one spouse dies? thanks
bsteiner
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Re: Beneficiaries/TOD for Vanguard Joint Account

Post by bsteiner »

drzzzzz wrote: Sun Oct 10, 2021 9:40 pm How does step up basis work with a brokerage account that is in a revocable trust when one spouse dies? thanks
The trust is ignored. In a common law state there would be a step-up if the grantor spouse dies. In a community property state there would be a step-up if either spouse dies.

The above assumes that the assets are community property in a community property state and that they’re not community property in a common law state.
jpatul
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Re: Beneficiaries/TOD for Vanguard Joint Account

Post by jpatul »

yeah, never understood this one. so you can add primary and backup to individual accounts but you cant add a beneficiary to a joint account? easier to do a joint account than TOD cuz if the person dies, TOD is more involved (e.g have to present the death certificates) than a joint account. Just added TOD to a joint account at TRP.
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