Secondary beneficiary for JTWROS brokerage account

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SleepKing
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Secondary beneficiary for JTWROS brokerage account

Post by SleepKing » Wed Sep 26, 2018 3:37 pm

Just got off phone with Vanguard representative. I asked how to designate a secondary beneficiary on our joint brokerage account (JTWROS). The Vanguard rep PLAINLY said since it is a joint account we are UNABLE to designate a secondary beneficiary. I said, ok, what happens if my wife and I are killed by a drunk driver; i'd like to set up a secondary bene for rare but plausible cases like this. She said 'we can open a Trust account or individual account if we'd like to designate a secondary beneficiary, but that it CANNOT be done for a JTWROS brokerage account.' She also suggested I 'discuss that matter with an estate planning attorney'. LOL!!

I've never heard of this restriction before, is it true?

Sleepy

Morgan22
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Re: Secondary beneficiary for JTWROS brokerage account

Post by Morgan22 » Wed Sep 26, 2018 3:46 pm

It's true. That's why we are with Merrill Edge. (Though we may switch to Fidelity in the future. My spouse does not like the ME interface.)

Alan S.
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Re: Secondary beneficiary for JTWROS brokerage account

Post by Alan S. » Wed Sep 26, 2018 5:16 pm

You can easily find a custodian to add a beneficiary to a JTWROS or CPWROS account.

Had one with T Rowe Price and currently have one with Schwab. https://client.schwab.com/secure/file/P ... 0-fill.pdf

CRTR
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Re: Secondary beneficiary for JTWROS brokerage account

Post by CRTR » Wed Sep 26, 2018 5:33 pm

That's odd.
I thought in JRWOS, both you and your wife are account "owners". The primary beneficiary would be the recipient if you both die. The secondary recipient would come into play only if the primary was already dead.

Addendum:. I just checked online and I am listed as the PRIMARY beneficiary for my parents' old JTWROS at Vanguard. There is no option for a secondary.

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Kenkat
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Re: Secondary beneficiary for JTWROS brokerage account

Post by Kenkat » Wed Sep 26, 2018 5:41 pm

It’s true. Just ran into this recently. Other companies support this but Vanguard doesn’t. Note that this only applies to taxable accounts registered as JTWROS. You can’t really name any beneficiaries on JTWROS accounts; only the survivor of the JTWROS is the “primary”. IRA accounts do allow for primary and secondary / contingent beneficiaries.

Here is another post on the topic:

viewtopic.php?t=143024

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Re: Secondary beneficiary for JTWROS brokerage account

Post by abuss368 » Wed Sep 26, 2018 7:05 pm

That is my understanding as well.
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alex_686
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Re: Secondary beneficiary for JTWROS brokerage account

Post by alex_686 » Wed Sep 26, 2018 7:43 pm

When I worked in Custody and Transfer, the way it was explained to me was than when the first person die, the second would get the account. So far so good. So if the husband died in the car crash, and the wife died 1 second latter, the account would be under the wife's name. Rights of survivorship would not apply in this case.

Both parties literally have to die simultaneously. I don't know of any brokerage that wants to wade into that particular mess to figure out that particular rare event.

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Kenkat
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Re: Secondary beneficiary for JTWROS brokerage account

Post by Kenkat » Wed Sep 26, 2018 7:46 pm

alex_686 wrote:
Wed Sep 26, 2018 7:43 pm
When I worked in Custody and Transfer, the way it was explained to me was than when the first person die, the second would get the account. So far so good. So if the husband died in the car crash, and the wife died 1 second latter, the account would be under the wife's name. Rights of survivorship would not apply in this case.

Both parties literally have to die simultaneously. I don't know of any brokerage that wants to wade into that particular mess to figure out that particular rare event.
Ok, so the wife died 1 second later? Now who gets the money? No one, according to Vanguard - it’s going to probate. Other companies will allow you to specify a transfer on death or a secondary beneficiary in the event the joint tenants both die at same or very close to the same time. I have set up TOD with other companies on joint accounts but Vanguard doesn’t support it. They are behind the industry on this.

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SleepKing
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Re: Secondary beneficiary for JTWROS brokerage account

Post by SleepKing » Thu Sep 27, 2018 7:09 am

Thanks everyone for the information and comments. Yes, we've confirmed via Bogleheads and other venues that Vanguard does not allow a TOD or contingent beneficiary for JTWROS accounts. Thus, only option is to open multiple individual accounts if you want to designate secondary or contingent beneficiary. Not even entertaining the route of a trust account at this time....

It is unfortunate Vanguard does not allow for a contingent or TOD style beneficiary on JTWROS accounts. I mean, a major reason for all this planning is to AVOID probate in all possible, even very unlikely, scenarios for survivors. Also, the interaction with the 'rep' on the phone was not a positive experience. Perhaps its time to take a long look at Fidelity for future business....

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HueyLD
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Re: Secondary beneficiary for JTWROS brokerage account

Post by HueyLD » Thu Sep 27, 2018 8:23 am

I think we need to start a campaign and write to Vanguard about their unwillingness to allow for beneficiaries on joint accounts. If they care about keeping their customers with joint accounts, they should listen to us.

alex_686
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Re: Secondary beneficiary for JTWROS brokerage account

Post by alex_686 » Thu Sep 27, 2018 9:17 am

Kenkat wrote:
Wed Sep 26, 2018 7:46 pm
I have set up TOD with other companies on joint accounts but Vanguard doesn’t support it. They are behind the industry on this.
O.K., other companies allow this. Can you point to any actually cases where this kicks in? Where 2 people died about the same time but not exactly the same time? As I said in my earlier post, I believed that people people had to die simulations - the same second. And that the actual cases where this would happen are basically nil. Now, it was 15 years ago when I was doing this so maybe things have changed. To play devil's advocate, maybe this is something other brokers are just throwing out there to shut down arguments knowing it will never actually be used.

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Kenkat
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Re: Secondary beneficiary for JTWROS brokerage account

Post by Kenkat » Thu Sep 27, 2018 9:24 am

alex_686 wrote:
Thu Sep 27, 2018 9:17 am
Kenkat wrote:
Wed Sep 26, 2018 7:46 pm
I have set up TOD with other companies on joint accounts but Vanguard doesn’t support it. They are behind the industry on this.
O.K., other companies allow this. Can you point to any actually cases where this kicks in? Where 2 people died about the same time but not exactly the same time? As I said in my earlier post, I believed that people people had to die simulations - the same second. And that the actual cases where this would happen are basically nil. Now, it was 15 years ago when I was doing this so maybe things have changed. To play devil's advocate, maybe this is something other brokers are just throwing out there to shut down arguments knowing it will never actually be used.
Vanguard used to allow this in the past. Here’s the scenario. Husband and wife are in an auto accident. Husband dies instantly; wife makes it to the hospital in critical condition. Legally, ownership transfers to the wife. Two days later, before anyone can make changes to beneficiaries on the now individual account (it would still be registered as a JTWROS at Vanguard), the wife dies. Account passes to the wife’s estate and must go through probate. At other companies, the TOD or contingent beneficiary would kick in at this point, bypassing probate.

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HueyLD
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Re: Secondary beneficiary for JTWROS brokerage account

Post by HueyLD » Thu Sep 27, 2018 9:52 am

The scenario indicated by Ken is quite problematic for those with blended families.

I will start my writing campaign today.

Amanda999
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Re: Secondary beneficiary for JTWROS brokerage account

Post by Amanda999 » Thu Sep 27, 2018 10:11 am

This is the sole reason we are moving our tenants by entireties accounts from Vanguard - because they refuse to allow us to name beneficiaries. (I know that we can transfer ownership to our marital trusts, but choose not to for reasons I'm not going to bore you with. Schwab and Fidelity have no problem naming benes on joint accounts - and Schwab permits free reinvesting of Vanguard Admiral Funds, even an international one Fidelity won't - so we're leaving Vanguard for all joint accounts.)

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Re: Secondary beneficiary for JTWROS brokerage account

Post by retiringwhen » Thu Sep 27, 2018 10:35 am

HueyLD wrote:
Thu Sep 27, 2018 9:52 am
The scenario indicated by Ken is quite problematic for those with blended families.

I will start my writing campaign today.
For blended families, it seems like a joint account is a problem from the beginning. I wouldn't want more than current working funds (e.g., enough to pay bills, etc.) in ANY joint accounts. There are way too many ways the trail of the funds could end up getting commingled or transferred. If legacy is intended for flow to the pre-blended family members, it would seem most important that the ownership trail is very very clear at all times and a JTWROS account would not be a good idea.

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Re: Secondary beneficiary for JTWROS brokerage account

Post by bsteiner » Thu Sep 27, 2018 10:49 am

retiringwhen wrote:
Thu Sep 27, 2018 10:35 am
HueyLD wrote:
Thu Sep 27, 2018 9:52 am
The scenario indicated by Ken is quite problematic for those with blended families.

I will start my writing campaign today.
For blended families, it seems like a joint account is a problem from the beginning. I wouldn't want more than current working funds (e.g., enough to pay bills, etc.) in ANY joint accounts. There are way too many ways the trail of the funds could end up getting commingled or transferred. If legacy is intended for flow to the pre-blended family members, it would seem most important that the ownership trail is very very clear at all times and a JTWROS account would not be a good idea.
Blended families (or any couples) wouldn't use joint accounts or TOD designations in favor of the spouse unless they wanted the surviving spouse to have complete control over the disposition of the assets at the surviving spouse's death.

While joint accounts and TOD designations are useful in some cases, they can easily destroy an estate plan. People should be careful in using them.

We've had several estate plans defeated by TOD designations recommended by stockbrokers who didn't know the clients' estate plans.

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Mursili
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Re: Secondary beneficiary for JTWROS brokerage account

Post by Mursili » Thu Sep 27, 2018 11:06 am

SleepKing wrote:
Thu Sep 27, 2018 7:09 am
Perhaps its time to take a long look at Fidelity for future business....
I just verified that the JWROS Cash Management account at Fidelity that I own with my wife has contingent beneficiaries listed. Thanks for getting me to make sure that we have fully specified the account.
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billfromct
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Re: Secondary beneficiary for JTWROS brokerage account

Post by billfromct » Thu Sep 27, 2018 12:26 pm

I guess I'm a little confused.

CRTR said that he checked his parent's joint Vanguard account. CRTR said that he is the primary beneficiary for his parents joint Vanguard account.

So theoretically, CRTR's surviving parent is the primary beneficiary & CRTR is theoretically the secondary beneficiary although listed as the primary.

If one of CRTR's parents died, he or she would have CRTR as the primary beneficiary (like now) on the new single owner account & would have to name a new secondary beneficiary to the single owner account.

I don't understand the issue. In effect, there is a primary beneficiary (surviving joint owner) & a secondary beneficiary (primary beneficiary) just as in a single designated owner account.

I am not familiar with joint accounts, so I'm just throwing in my 2¢.

bill

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Re: Secondary beneficiary for JTWROS brokerage account

Post by Dottie57 » Thu Sep 27, 2018 12:39 pm

SleepKing wrote:
Wed Sep 26, 2018 3:37 pm
Just got off phone with Vanguard representative. I asked how to designate a secondary beneficiary on our joint brokerage account (JTWROS). The Vanguard rep PLAINLY said since it is a joint account we are UNABLE to designate a secondary beneficiary. I said, ok, what happens if my wife and I are killed by a drunk driver; i'd like to set up a secondary bene for rare but plausible cases like this. She said 'we can open a Trust account or individual account if we'd like to designate a secondary beneficiary, but that it CANNOT be done for a JTWROS brokerage account.' She also suggested I 'discuss that matter with an estate planning attorney'. LOL!!

I've never heard of this restriction before, is it true?

Sleepy
Since the spouse is a joint owner, spouse owns the account at death of the other spouse. Neither spouse is a beneficiary but owner. When both die, the beneficiary will get the account.

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Re: Secondary beneficiary for JTWROS brokerage account

Post by fourwheelcycle » Thu Sep 27, 2018 1:06 pm

SleepKing wrote:
Thu Sep 27, 2018 7:09 am
It is unfortunate Vanguard does not allow for a contingent or TOD style beneficiary on JTWROS accounts. I mean, a major reason for all this planning is to AVOID probate in all possible, even very unlikely, scenarios for survivors.
My wife and I had individual taxable accounts at Vanguard since the early 1980s. A few years ago we decided to move to a joint taxable account, partly to simplify our accounts before our children have to deal with them and partly because after forty years of marriage it seemed unlikely we would ever split up. We too were surprised to learn Vanguard does not offer beneficiary designations for joint taxable accounts.

However, we were also interested in helping our two adult children, who do not live nears us, avoid the need take our estate through probate or hire an attorney do it for them, especially since I know they will have to do all the work to provide detailed estate info for the probate filings whether they prepare and submit the filings themselves or hire an attorney to do it for them. Ultimately, we decided the simplest solution for our children would be to simply step in as trustees for a joint living trust (JRT), even though we do not live in a community property state.

For less than $3K an experienced local estate attorney prepared a complete set of documents for us, including a JRT, pour-over wills, a deed of gift that gives all of our house contents and cars to our JRT, DPOAs, advance directives, special beneficiary designations for our IRAs, which Vanguard accepted, and a state application to change our house deed to our JRT, which the attorney submitted and followed to completion.

Now we are all set with our new taxable account at Vanguard, owned by our JRT. When the second of us dies, or if we both die together, our children can seamlessly step in and begin managing the account as the new trustees of our JRT.

There are many threads on this forum which note TOD is a very blunt instrument for estate planning that can sometimes result in unforeseen outcomes if the TOD accidentally conflicts with the provisions of a will or trust. We use TOD designations to our children for about $60K of Marcus savings that represent our emergency fund today and would represent an immediate cash resource for our children to pay our final expenses if (when!) we die.

Edited for typos.
Last edited by fourwheelcycle on Fri Sep 28, 2018 9:50 am, edited 2 times in total.

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Re: Secondary beneficiary for JTWROS brokerage account

Post by fire5soon » Thu Sep 27, 2018 2:17 pm

This is 99.9% of the reason why I have no after-tax assets at Vanguard. How a company as large as Vanguard does not support this basic function is amazing to me. When I called and asked the rep told me not all states have adopted the TOD designation. I replied, "yes, only TX and LA haven't adopted TOD's, but what about the rest of us?" The dead air (no pun intended) after I said that was deafening. It's a shame when the caller knows more about the topic than the financial company's own rep does.

If anyone is interested, you can search "SEC TOD accounts" for info directly from the S.E.C. as well as a list of states who have adopted the designation. Perhaps Vanguard should be sent the link as well... :annoyed
Last edited by fire5soon on Thu Sep 27, 2018 3:12 pm, edited 1 time in total.
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dm200
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Re: Secondary beneficiary for JTWROS brokerage account

Post by dm200 » Thu Sep 27, 2018 2:27 pm

This discussion, in my opinion, shows the need for will(s) that handle all such events and sequences - and reduce the chance of "unintended consequences".

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Kenkat
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Re: Secondary beneficiary for JTWROS brokerage account

Post by Kenkat » Thu Sep 27, 2018 8:04 pm

billfromct wrote:
Thu Sep 27, 2018 12:26 pm
I guess I'm a little confused.

CRTR said that he checked his parent's joint Vanguard account. CRTR said that he is the primary beneficiary for his parents joint Vanguard account.

So theoretically, CRTR's surviving parent is the primary beneficiary & CRTR is theoretically the secondary beneficiary although listed as the primary.

If one of CRTR's parents died, he or she would have CRTR as the primary beneficiary (like now) on the new single owner account & would have to name a new secondary beneficiary to the single owner account.

I don't understand the issue. In effect, there is a primary beneficiary (surviving joint owner) & a secondary beneficiary (primary beneficiary) just as in a single designated owner account.

I am not familiar with joint accounts, so I'm just throwing in my 2¢.

bill
Vanguard used to allow this and stopped at some point in the past according to a post in the conversation I linked above. So, it is possible that CRTR was set up when this was still allowed by Vanguard.

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Kenkat
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Re: Secondary beneficiary for JTWROS brokerage account

Post by Kenkat » Thu Sep 27, 2018 8:10 pm

dm200 wrote:
Thu Sep 27, 2018 2:27 pm
This discussion, in my opinion, shows the need for will(s) that handle all such events and sequences - and reduce the chance of "unintended consequences".
A will has to go through probate though and so if you can intercept this process by using beneficiaries or TOD designations, it is nice to have that option. In my case, I have a simple husband wife two (now adult) kids scenario and a TOD designation is all that is needed for our Vanguard account but is not available. So, if one of us meets an untimely demise, the other can then switch the account registration and name beneficiaries or make a TOD designation. If we die together, our two kids get to take it through probate. Not the end of the world but not my first choice either.

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SleepKing
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Re: Secondary beneficiary for JTWROS brokerage account

Post by SleepKing » Fri Sep 28, 2018 8:27 am

Kenkat wrote:
Thu Sep 27, 2018 8:10 pm
If we die together, our two kids get to take it through probate. Not the end of the world but not my first choice either.
Exactly. Our attorney clearly stated our will/trust does provide how these funds will be dispersed, just that they would need to go through probate to achieve that objective.

We're still deciding whether to ditch Vanguard for our taxable account just for this reason.

thanks all for the discussion!

Sleepy

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