Account ownership and beneficiary designations are just as important than your Will or your Trust. There . . . I said it.
That’s because jointly held accounts or accounts with designated beneficiaries pay to those specific individuals – outside the process of estate or trust administration and regardless of what the legal documents say. In layman’s terms, they override the provisions of a Will or Trust.
That is exactly why these designations need to be gathered, confirmed, and reviewed as a core part of the estate planning process. And here is the catch: your attorney cannot pull this information for you. We have no way to call your bank, log in to your brokerage account, or query your retirement plan administrator. We rely entirely on you, the client, to gather it and bring it to the table.
Why Account Titling Matters in Estate Administration
Account ownership is established at the time an account is opened. If it is a deposit account, like a checking account, ownership is reflected on what is called a signature card. For investment accounts, like a brokerage account, ownership is established at the account opening with the advisor or investment company. Unfortunately, these account-opening documents are almost always lost over time, so it is incredibly difficult years later to determine how ownership is held.
In almost every case, accounts with more than one owner are held jointly with survivorship. But, that isn’t every case. . .
Estate Administration Challenges in a Digital World
So, how does one know how an account is owned? Usually there are clues like a bank statement or investment account statement. When there are two names listed at the top, it’s generally safe to say that ownership is joint and it’s generally safe to assume with survivorship. But, in today’s digital world, fewer and fewer people are receiving statements in the mail. Instead, they are delivered in an electronic format. And, when someone dies, those left behind, like an Executor, loses access to those electronic documents – which then leaves them guessing. More importantly, that leaves the attorney retained to assist with the administration guessing — and the attorney has no independent way to find out. We cannot log in to the decedent’s accounts, and the financial institution will not tell us how the account was titled without legal authority that itself takes weeks or months to obtain.
Common Beneficiary Designation Mistakes in Estate Planning
The same goes for beneficiary designations. Some assets, such as retirement accounts, cannot name joint owners but, in almost every case, there is a named beneficiary. Likewise, some individuals may have chosen not to have joint ownership on deposit accounts, but the account owner named a payable on death (“POD”) or transfer on death (“TOD”) beneficiary. Yet, without having knowledge of what these designations say, those left behind are also left wondering. This is precisely why beneficiary designations should be pulled, printed, and reviewed alongside the Will and Trust every time the estate plan is updated. An outdated beneficiary form — naming an ex-spouse, a deceased relative, or no one at all — can quietly undo years of careful planning, and your attorney has no way to spot the problem unless you bring the designation in. And, as we move to more and more digital formats for the delivery of information and with more security – two factor authentication for example – this information is lost to those who may need to know.
Additionally, not knowing how accost or titled or beneficiaries are designated can lead to extra work. These accounts pass to the joint owner or designated beneficiary without the need for any formal administration. However, if the executor of an estate is unaware, then they may take steps to begin a formal administration process later to discover that was not necessary. But, once the process has started, there is no way around it.
Steps to Protect Your Estate Plan From Unintended Consequences
The takeaway: reviewing account ownership and beneficiary designations is a critical part of estate planning and adjustments may need to be made to ensure your plan works as you intend. After signing your estate planning documents – and every few years after — review and adjust as necessary. And be sure to keep written confirmation directly from the financial institution in a location that is available to your Executor and your Attorney. Low-tech is best and the more people who know the better. Have questions? Contact our team today to schedule a consultation.