Titling of joint taxable account w/spouse in community property state?

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need403bhelp
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Joined: Thu May 28, 2015 6:25 pm

Titling of joint taxable account w/spouse in community property state?

Post by need403bhelp » Wed May 16, 2018 4:47 pm

Thank you all for your past help!

I was opening a joint taxable account w/spouse at Vanguard and got stuck on the screen asking me to select:
A. Joint tenants with right of survivorship
B. Tenants in common
C. Community property
D. Community property with right of survivorship

I live in a community property state (Texas).

I honestly am not 100% sure that I understand the differences or the optimal choice. Ideally, the account would belong fully to me and my wife both (something like tenants in common), but would automatically belong 100% to other partner upon death (like joint tenants with right of survivorship and community property with right of survivorship). However, this doesn't seem to be an option.

As such, what is the best option to choose?

Thank you so much!

EDIT: For what it is worth, I am also in a profession where I could potentially get sued, so some protection from creditors would be nice, if possible. Obviously, I have appropriate insurance for personal and professional liability.

soccerrules
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Re: Titling of joint taxable account w/spouse in community property state?

Post by soccerrules » Wed May 16, 2018 5:07 pm

I am no expert, but live in same state.

I believe ours is option A.
I went and looked at the account and both our names are listed and then JT Ten WROS. Assume Joint Tenants with right of survivorship.

Maybe an attorney will come along and help us if that is the best option. :beer
Don't let your outflow exceed your income or your upkeep will be your downfall.

need403bhelp
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Re: Titling of joint taxable account w/spouse in community property state?

Post by need403bhelp » Wed May 16, 2018 6:05 pm

soccerrules wrote:
Wed May 16, 2018 5:07 pm
I am no expert, but live in same state.

I believe ours is option A.
I went and looked at the account and both our names are listed and then JT Ten WROS. Assume Joint Tenants with right of survivorship.

Maybe an attorney will come along and help us if that is the best option. :beer
I see. Thanks so much for sharing the titling of your account. Any reason why you chose that particular titling?


TwstdSista
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Re: Titling of joint taxable account w/spouse in community property state?

Post by TwstdSista » Wed May 16, 2018 6:33 pm

In my state (not Texas) Tenants In Common and Joint Tenants with Rights of Survivorship both solely refer to how assets are dealt with upon death. In life, both TIC and JTWROS mean joint ownership. At death, a TIC asset is owned 50% by the estate (and thus heirs) of deceased owner and 50% by the surviving owner. With JTWROS, at death the asset becomes 100% the property of the surviving joint tenant (no estate of heirs get involved).

need403bhelp
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Re: Titling of joint taxable account w/spouse in community property state?

Post by need403bhelp » Wed May 16, 2018 6:44 pm

elcadarj wrote:
Wed May 16, 2018 6:29 pm
This breaks it down for you:

https://info.legalzoom.com/difference-b ... 21133.html
Thank you for the helpful article. I am still somewhat confused after reading and re-reading it. For example, it states:
When a married couple owns property as a joint tenancy, both spouses share equal ownership interests in the entire property. For example, if a married couple owns a home as joint tenants, each has a 50 percent interest in the home. However, these interests are undivided. This means that each spouse is entitled to use the entire property and the interests cannot be split up.
The bolded part sounds quite beneficial from a lay perspective. For example, it sounds like if I am sued the property/account is still protected, as my wife is "entitled to use the entire property and the interests cannot be split up" (or does this only apply to physical property)?

I am unclear whether the same "undivided" interest applies to "community property with rights of survivorship"? It sounds like that is not the case per the below?
In these states, marital property is viewed as belonging to each spouse equally. Each spouse has a right to pass on his share to whomever he wishes in a last will and testament.
The only other difference that I can tell is that community property with rights of survivorship gets a stepped-up basis for 100% of the holdings at the time of spouse's death, whereas a joint tenancy with rights of survivorship would only get a stepped-up basis on 50%, correct?

Thank you again!

chestnut
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Re: Titling of joint taxable account w/spouse in community property state?

Post by chestnut » Wed May 16, 2018 6:57 pm

One more thing to consider -- we were told that joint taxable accounts at Vanguard can't designate beneficiaries.

need403bhelp
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Re: Titling of joint taxable account w/spouse in community property state?

Post by need403bhelp » Wed May 16, 2018 7:46 pm

chestnut wrote:
Wed May 16, 2018 6:57 pm
One more thing to consider -- we were told that joint taxable accounts at Vanguard can't designate beneficiaries.
Thanks! That is definitely good to know.

Alan S.
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Re: Titling of joint taxable account w/spouse in community property state?

Post by Alan S. » Wed May 16, 2018 10:33 pm

need403bhelp wrote:
Wed May 16, 2018 7:46 pm
chestnut wrote:
Wed May 16, 2018 6:57 pm
One more thing to consider -- we were told that joint taxable accounts at Vanguard can't designate beneficiaries.
Thanks! That is definitely good to know.
It is good to know, but it is not a good restriction. Most other brokerages allow a CPWROS to name a TOD beneficiary who will inherit directly upon the death of the second spouse. I can attest first hand this is not a problem at either T Rowe Price or Schwab.

Normally, a resident of a CP state would elect to title taxable accounts as CPWROS in order to get 100% basis adjustment upon the death of the first spouse. That could save the surviving spouse from paying a considerable amount of cap gain taxes when the shares are sold.

need403bhelp
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Joined: Thu May 28, 2015 6:25 pm

Re: Titling of joint taxable account w/spouse in community property state?

Post by need403bhelp » Thu May 17, 2018 4:56 pm

Alan S. wrote:
Wed May 16, 2018 10:33 pm
need403bhelp wrote:
Wed May 16, 2018 7:46 pm
chestnut wrote:
Wed May 16, 2018 6:57 pm
One more thing to consider -- we were told that joint taxable accounts at Vanguard can't designate beneficiaries.
Thanks! That is definitely good to know.
It is good to know, but it is not a good restriction. Most other brokerages allow a CPWROS to name a TOD beneficiary who will inherit directly upon the death of the second spouse. I can attest first hand this is not a problem at either T Rowe Price or Schwab.

Normally, a resident of a CP state would elect to title taxable accounts as CPWROS in order to get 100% basis adjustment upon the death of the first spouse. That could save the surviving spouse from paying a considerable amount of cap gain taxes when the shares are sold.
Thank you so much for clarifying that the inability to add beneficiaries to a CPWROS account at Vanguard is the exception rather than the norm. I will definitely consider opening one at Fidelity instead if that is not an issue there.

Thank you, also, for clarifying the advantage of CPWROS that a spouse gets 100% basis adjustment upon the death of the first spouse.

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