Estate Plan Elements: TOD and Joint Accounts

Continuing August as “National Wills Month,” TOD, or “Transfer on Death,” is another important aspect of estate planning. It involves designating an individual or entity to receive your assets after your passing, outside of probate. Probate court is the state law that determines where your assets will go if you do not have a beneficiary or TOD designated for your Investment accounts.

 

Retirement accounts require beneficiaries. Investment or brokerage accounts (non-retirement, taxable accounts) have TOD or “Transfer on Death” designated people, persons, or entities. For all of your financial accounts, it is very important to have appointed, up-to-date beneficiaries/TOD/POD designations for smoother transfer to your heirs after your passing.

 

In California, a “community property” state, your spouse will be the 100% primary TOD designation. To designate a non-spouse as TOD 100% primary designation requires a notary and a spouse's signature. All banks and financial institutions have a “TOD” or “Transfer on Death” form to complete.

 

Important things to note:

• If there is a Trust, consult whether this specific account is listed in the Trust.
• If this is an account owned by a married person, but separate property, consult your estate planning attorney about your best next steps
• Life changes happen, and Beneficiary/TOD designations change. For instance, if you have a divorce, you will want to update your Beneficiary/TOD settings on all of your brokerage and bank accounts if you wish to change your beneficiary
• POD is the equivalent for banks, meaning Payable on Death, for cash accounts such as checking accounts, savings accounts, and other non-investment accounts.

 

A Joint Account with Aging Parents could be another option for estate planning. Here are three notes regarding a Joint Account:

 

1. Adult children as Joint Account holders have advantages for fraud-detection and access to liquid cash when probate might otherwise prevent such access
2. However, take note of issues regarding sibling situations and which adult children the account can be used at either your or their (the Joint Account holder adult child) discretion.
3. Other different options include adding an adult child as a signer on the account but not an owner.

 

This article from Barron’s could be helpful for more information about Joint Accounts with Aging Parents.

 

A Note About Transfer of Assets After your Passing:

Probate is the state-administered process of distributing your assets to your heirs. It is a public process administered by the courts. “Public” means the process is subject to an individual contesting the distribution.

 

Electing beneficiaries and having a Trust in place passes assets outside of probate. From a timeline perspective, the administration of the probate process can take up to two years or more versus distributing an estate based on beneficiary and Trust designations which can take up to one year or less.

 

Markets

After a positive July, August has brought a return to the glass half empty. Concern about inflation causing an increase in interest rates has led to concern in markets. The yield curve continues to be inverted after 2-year maturity, although the spread between 2 and 10-year US Treasury yields has narrowed, but is still currently inverted meaning that the bond market is expecting economic growth to slow. This view is reflected so far in August’s market moves. Our expectation is that any positive news on the trajectory of inflation- a decline would be positive- will rally stock and bond markets. However, the economic situation is volatile with the job market still strong, consumers still spending, the housing market slowing down along with economic growth slowing. 

 

The “great resignation” and “quiet quitting.” Two of the many trends and labels emerging from Covid times. Quiet quitting is especially trendy right now originating with Gen Z. If the number of mentions in the news was a contrary indicator, then quiet quitting should be over by the end of next week. First, the great resignation caused trembles in the labor market as well as offering a potentially large impact on lifestyle. Working from home unchained many office workers from their office/desk. Some employers like Apple require workers to come to the office 3 days/week. Will other employers follow suit? We shall see. 

 

Be thankful for Gen Z. They have introduced us to rational thinking about work/life balance that SAS wrote about in last week’s blog. We have been through work/life balance phases before, but with the addition of COVID-19 issues, Gen Z has had enough. There are lessons for us all in regard to paying attention to the dynamics of quiet quitting which isn’t exactly what it sounds like.

 

 

Health

You will be happy to know that research from the CDC indicates that life expectancy does differ on average depending on where you live. The good news for us in California is that we are high on the list at number 2 with Washington state. This research is colored by a two-year pandemic with life expectancy dropping in the US.

 

Student Loans

With colleges starting up again, as well as application season in full season, student loans are always of consideration. President Biden has announced measures that help relieve student loans for people that meet certain thresholds. More information can be found at the links below:

 

1. Biden announces student loan relief for borrowers making less than $125,000

2. Here’s what President Biden’s student loan forgiveness means for your taxes

GradFin will be hosting a Webinar on September 1st at 2:00 PM to discuss the changes made to student loans. Click here to register.

 

Housing Prices

According to experts, we are now in a housing recession. However, the recession affects certain parties differently than others. To learn more, visit this CNBC article.

 

This website is informational only and does not constitute investment advice or a solicitation. Investments and investment strategies recommended in this blog may not be suitable for all investors. SAS Financial Advisors, LLC and its members may hold positions in the securities mentioned within this newsletter.

The SAS Newsletters are posted on the SAS Blog weekly: https://www.sasadvisors.com/blog