The Importance of the TOD and JTWROS Designations

Many people have heard about the nightmares in dealing with probate after coping with the loss of a loved one. Whether dealing with a busy and expensive court system, a long-lost relative claiming the proceeds of an inheritance, or having the entire process subject to public scrutiny, probate can be time-consuming and far from a private matter.

Fortunately, there are ways to avoid these headaches and speed up the process. Learn about Transfer on Death (TOD) and Joint Tenants with Right of Survivorship (JTWROS) designations below.

Transfer on Death (TOD) Accounts

The easiest way to mitigate the stress of probate is to designate a beneficiary or beneficiaries on your brokerage accounts and register them as TOD accounts. This designation can be applied to investment accounts like brokerage accounts and mutual fund accounts (non-IRA accounts).

Thus, if something were to happen to you, the beneficiary could provide a copy of your death certificate to the custodian of the investment account. The custodian would then create a new brokerage account for the beneficiary or beneficiaries and transfer the funds into the new account. You can accomplish all this without dealing with probate and its hassles.

Additionally, TOD accounts provide security as your beneficiaries cannot access them while you are alive.

Joint Tenants with Right of Survivorship (JTWROS) Accounts

If you are a married couple with a joint brokerage account, creating a JTWROS account is another easy solution to the probate process. This protective measure gets the assets into the surviving spouse’s hands quickly, so it’s a crucial consideration in estate planning.

Don’t let the name confuse you—in this case, “tenant” is unrelated to renting or leasing a house or apartment, instead referring to the individuals who own the asset. JTWROS is a designation for assets like bank accounts, real estate, and investment accounts.

If you and your spouse have a JTWROS, you both have equal rights to use the asset as you desire. And if one tenant passes away, the surviving owner inherits their stake in the property.

Take a Financially Savvy Approach to Your Estate Planning

Probate is time-consuming and costly, not to mention that it is open to the public and has the potential to include people in an estate that the deceased had no intention of including. TOD and JTWROS accounts ensure your assets end up with the people you intended.

Plus, your family will already have plenty of grieving and other matters to handle after your passing. They don’t need more stress and discord from poorly structured finances.

Setting up TOD or JTWROS designations can avoid messy situations and provide peace of mind to anyone who wants to protect their rightful beneficiaries. It is a simple process but can go a long way to ensuring financial security for the people you love.

Are you interested in establishing a TOD or JTWROS account? Speak with a Carlson Investments advisor today to learn how we can guide the way.

Carlson Investments does not provide tax, legal, or accounting advice. This content has been written for informational purposes only. Always consult your individual tax, legal, or financial professionals for advice tailored to your situation.

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