Named Beneficiary for IRA and other property vs. will/trust

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
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Topic Author
inbox788
Posts: 8134
Joined: Thu Mar 15, 2012 5:24 pm

Named Beneficiary for IRA and other property vs. will/trust

Post by inbox788 »

https://www.bogleheads.org/wiki/Probate ... ate_estate

I opened a Vanguard account and was offered the choice of:
1) Spouse by name
2) To the person I am married to at the time of my death

Assuming they're one and the same (i.e. current spouse is person married to at time of death), is there any difference? I assume both avoid probate, no? Are there minor things like having to provide a marriage certificate in the latter?

If you setup a POD/Named Beneficiary, do you still mention these accounts in the Will or Trust or are they likely to lead to confusion and conflict? And more generally, do you include financial accounts in your living trusts?

https://nolonow.nolo.com/noe/modules/li ... 15p_3.html

I'm the Account Owner/Participant for my children's 529, my spouse is the Successor Participant, but what about the rare case where both parents are in a fatal accident?
PinotGris
Posts: 764
Joined: Tue Feb 14, 2012 9:38 pm

Re: Named Beneficiary for IRA and other property vs. will/tr

Post by PinotGris »

I opened a Vanguard account and was offered the choice of:
1) Spouse by name
2) To the person I am married to at the time of my death

Assuming they're one and the same (i.e. current spouse is person married to at time of death), is there any difference? I assume both avoid probate, no? Are there minor things like having to provide a marriage certificate in the latter?
I understand it as if i remarry after death/divorce of spouse, option 2) would be safer if ido not want the EX to get anything.
If you setup a POD/Named Beneficiary, do you still mention these accounts in the Will or Trust or are they likely to lead to confusion and conflict?
i think for taxable accounts it is TOD - Transfer on death. TOD supersedes whatever is on the Will.
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Matahari
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Re: Named Beneficiary for IRA and other property vs. will/tr

Post by Matahari »

I opened a Vanguard account and was offered the choice of:
1) Spouse by name
2) To the person I am married to at the time of my death

Assuming they're one and the same (i.e. current spouse is person married to at time of death), is there any difference? I assume both avoid probate, no? Are there minor things like having to provide a marriage certificate in the latter?
Option (2) above is mostly to prevent a situation whereby someone forgets to update his/her beneficiary designation after the end of a marriage followed by marriage to a new spouse.

Both options avoid probate of the account. The account would pass outside your probate estate and outside your will.

I have no firsthand experience, but regarding your question, I would imagine that your surviving spouse would have to provide a certified copy of the marriage license.
If you setup a POD/Named Beneficiary, do you still mention these accounts in the Will or Trust or are they likely to lead to confusion and conflict?
No, because the whole purpose of setting up a Transfer On Death arrangement is to cause these accounts to pass outside your will.

Question: are these individual accounts? Make sure, because if they are joint accounts, the surviving joint owner will take title to the account.
And more generally, do you include financial accounts in your living trusts?
If you intend that your financial accounts pass by way of TOD (for non-retirement accounts) and to your designated beneficiary(ies) (for retirement accounts), then if you address them in your living trust, you create a potential conflict in how you want these accounts to descend. From a legal standpoint, the designations you have in place at financial institutions will take precedence over anything in your will or trust agreement.
Alan S.
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Location: Prescott, AZ

Re: Named Beneficiary for IRA and other property vs. will/tr

Post by Alan S. »

You better have contingent beneficiaries on these accounts, because if you are single at your death these accounts may end up in your estate and that will produce negative results for your intended beneficiaries.
Topic Author
inbox788
Posts: 8134
Joined: Thu Mar 15, 2012 5:24 pm

Re: Named Beneficiary for IRA and other property vs. will/tr

Post by inbox788 »

Thanks for all the great comments so far.
Matahari wrote:Option (2) above is mostly to prevent a situation whereby someone forgets to update his/her beneficiary designation after the end of a marriage followed by marriage to a new spouse.

Both options avoid probate of the account. The account would pass outside your probate estate and outside your will.

I have no firsthand experience, but regarding your question, I would imagine that your surviving spouse would have to provide a certified copy of the marriage license.
I don't think it happens very often (someone gets remarried and forgets to update beneficiary), and if I can save my spouse more administrative red tape by listing a name, I'll chance divorce, remarrying and forgetting to update it.
If you intend that your financial accounts pass by way of TOD (for non-retirement accounts) and to your designated beneficiary(ies) (for retirement accounts), then if you address them in your living trust, you create a potential conflict in how you want these accounts to descend. From a legal standpoint, the designations you have in place at financial institutions will take precedence over anything in your will or trust agreement.
That's consistent with my understating of keeping financial accounts out of trusts. If you want them in the trust, you can primarily title them that way or make the TOD/POD to the trust.

viewtopic.php?f=2&t=162193&p=2435241

I'm trying to keep things simple, so this is my approach for now. Do you take a similar approach, put everything you can in a living trust, or other?

Will: Child guardianship
Trust: Real estate
TOD/POD: Financial accounts (checking/savings, IRA, Roth, taxable, etc.)

Still trying to figure out if it makes sense to put those financial accounts that can be into a trust and whether it leads to simplification or just adds to the complexity. I didn't realize that TOD can also be used for vehicle registrations ( https://www.dmv.ca.gov/portal/dmv/?1dmy ... 11/ch11_15 ).

If you switched strategies, why?

viewtopic.php?f=2&t=162193&p=2435241

http://www.wikihow.com/Transfer-Assets- ... ving-Trust
Bill M
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Re: Named Beneficiary for IRA and other property vs. will/tr

Post by Bill M »

If the beneficiary is a named person, there is no need for probate. If the beneficiary is "the person I am married to at the time of my death" then the executor of the estate will have to tell Vanguard who that person is. So someone will still need to file the will with the Probate Court, get affidavits from the witnesses to the will, pay the $$$ fee, get certified as executor, pay the surety bond, and all the rest of the hassle.
Alan S.
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Joined: Mon May 16, 2011 6:07 pm
Location: Prescott, AZ

Re: Named Beneficiary for IRA and other property vs. will/tr

Post by Alan S. »

Bill M wrote:If the beneficiary is a named person, there is no need for probate. If the beneficiary is "the person I am married to at the time of my death" then the executor of the estate will have to tell Vanguard who that person is. So someone will still need to file the will with the Probate Court, get affidavits from the witnesses to the will, pay the $$$ fee, get certified as executor, pay the surety bond, and all the rest of the hassle.
This is incorrect. The IRA would not become an estate asset.
The spouse will be able to deal directly with Vanguard in the same manner as if they were named, except possibly needing to submit extra documentation. This is an example of an identifiable person who will have all the rights and benefits of a named person and will be considered a "designated beneficiary" under the IRS Regs. Also, refer to the Vanguard IRA agreement "Identification of Beneficiaries" clause.
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