Is it difficult to inherit a non-retirement account at Vanguard as co-beneficiaries?

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CULater
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Is it difficult to inherit a non-retirement account at Vanguard as co-beneficiaries?

Post by CULater » Wed Nov 07, 2018 6:29 pm

I'm wondering if my mother should list myself and sister as co-beneficiaries of her Vanguard brokerage account. Her investments are non-complex, mainly just money market and short term brokered CDs. Would like to find out what is involved in inheriting her account as co-beneficiaries if she passes. Would we need to contact Vanguard jointly, or can each of us inherit our half separately? Would separate inherited accounts need to be established for each of us, or would it have to be a joint account? What are the tax implications for each of us? Would appreciate input from anyone who has information or has dealt with this with Vanguard. Thanks.
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IowaFarmBoy
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Re: Is it difficult to inherit a non-retirement account at Vanguard as co-beneficiaries?

Post by IowaFarmBoy » Wed Nov 07, 2018 7:12 pm

When my mother-in-law passed away a few years ago, my wife and her brother were joint beneficiaries for a combination of a taxable mutual fund account (before everything had to be brokerage accounts), a traditional IRA and a Roth IRA. As I recall, the process was pretty painless. We supplied a death certificate and they split the account. My wife got started quickly with a phone call and we had it all done within a few weeks of mailing the death certificate. My brother-in-law didn't get around to completing his paperwork for a while but that didn't delay getting my wife's processed. As I recall, we talked to them on the phone and they sent us a packet of forms that they scheduled a call during which they could walk my wife through signing.

I would definitely recommend having them split it into accounts. It just makes sense so you are free to buy, sell and reallocate independently. Plus then each of you gets your own distinct tax forms, etc.

One thing you didn't mention is what type of account your mother has- taxable, IRA, etc? I assumed it was a taxable brokerage account but I could have been wrong about that. The type of account will make a lot of difference in tax implications.

There was a similar brokerage account at Edward Jones. They required both heirs to have their paperwork in before they would split it. My wife's first set expired after 90 days and before her brother got his in so she had to do it again.

quantAndHold
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Re: Is it difficult to inherit a non-retirement account at Vanguard as co-beneficiaries?

Post by quantAndHold » Wed Nov 07, 2018 7:29 pm

At death, one of you has to produce the death certificate. Once they can confirm she is indeed dead, they send forms to you both. When you fill out the forms, they open new accounts for each of you with half of the assets. From there, it’s your account. You can do what you want. Sell, transfer to a different brokerage, leave it there, whatever. Easy peasy. When we did it, once we had a copy of the death certificate, the whole process took a couple of weeks.

In a taxable account, the tax basis of the assets is revalued to the date of her death, which doesn’t really matter for money markets and CD’s. Taxes on any interest earned during the period before the account is transferred to the beneficiaries would be paid by the estate. After the transfer, the taxes belong to the beneficiary.

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El Greco
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Re: Is it difficult to inherit a non-retirement account at Vanguard as co-beneficiaries?

Post by El Greco » Thu Nov 08, 2018 4:56 pm

As others said, it's fairly easy. Be sure to set up the account TOD (transfer on death) naming the two beneficiaries. You will have to supply a death certificate, fill out some forms and get a Medallion signature from a bank or other financial institution. Vanguard is one of a few companies that insist on a Medallion signature as a regular notarized signature will not do for them.

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