Estate distribution: Vanguard Account & Joint Checking

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cervisia
Posts: 17
Joined: Mon Oct 05, 2020 7:52 pm

Estate distribution: Vanguard Account & Joint Checking

Post by cervisia »

Scenario:
- A parent recently died
- Two Adult Children (call them A and B)
- Two accounts, each with low a 6-figure value, that per the will need to be split 50-50 between A and B.
I suspect these accounts can be handled outside of trust or probate and I have a couple super-basic questions to which I would appreciate input. I’m in beginner/learning mode for this type of topic.

Q #1: re: Vanguard traditional brokerage account; in the name of Parent; containing 3 mutual funds; primary beneficiaries listed as 50% A and 50% B
- What are the mechanics of how Vanguard distributes the accounts? (I get the impression both A & B would need to have/open traditional brokerage accounts and then the shares of the 3 funds are delivered 50-50 into the accounts)
- If late in the calendar year, If Parent marginal tax rate is lower than that of A and of B, could it be a good idea to wait until after December dividend distributions?

Q #2: re: Parent’s checking account jointly in the name of Parent & A.
- Would A writing a check to B be seen by the IRS as a gift from A to B?
- If so, what are reasonable alternative paths to distribute 50% of the funds to B?
ZWorkLess
Posts: 425
Joined: Thu May 04, 2017 8:13 pm

Re: Estate distribution: Vanguard Account & Joint Checking

Post by ZWorkLess »

IME,

#1 -- Call Vanguard. They'll have you send in a death certificate. (get dozens of copies.) They'll walk you through splitting the account. It's easy. IME, the parent's brokerage split the account into two parts, one in each heir's name. Then the child's brokerage (for me, Vanguard), pulls the account over.

#2 -- IME, technically, the joint owner owns the entire checking account, immediately upon the death of the other owner, and it isn't controlled by the will. IME, the co-owner could spend money out of that account right away. My brother and I were co-owners on Mom's main checking account, so we actually moved some extra money there when we knew she was dying, so that we'd have plenty of cash accessible to cover the burial costs, etc, without having to mess with keeping track of stuff when using our own funds. I'd run the issue by your estate attorney before proceeding, however. And, if that heir isn't a jerk, they'll, of course, be happy to square it all up in whatever ways makes the most sense (I.e., not claim that the entire sum is theirs alone and still claim half of everything else.)

IME, you can write checks among heirs to square stuff up, no problem. I wouldn't sweat it at all unless you were talking millions, in which case, I'd check with the estate attorney. IME, months after Mom passed away, I wrote a substantial (mid 5 figures) check to my brother to square up some stuff, and I also made similar contributions from me to each of my own kids to also square other estate stuff up and reflect what Mom's wishes were, because none of us were/are jerks, so of course, we did what was right. We had an attorney at every step, and he never expressed any concern at all about those checks/payments among us to square stuff up.
RubyTuesday
Posts: 2241
Joined: Fri Oct 19, 2012 11:24 am

Re: Estate distribution: Vanguard Account & Joint Checking

Post by RubyTuesday »

Q2 if the account was held jointly for the convenience of managing assets for the deceased or to provide access to funds during the probate process, the joint account is likely still part of the estate. Others will know for sure, but that’s my understanding. If that’s the case, the executor should be able to get the funds from joint checking and distribute per the will I suspect.
“Doing nothing is better than being busy doing nothing.” – Lao Tzu
chemocean
Posts: 1575
Joined: Mon Dec 19, 2016 8:45 pm

Re: Estate distribution: Vanguard Account & Joint Checking

Post by chemocean »

ZWorkLess wrote: Mon Dec 06, 2021 5:29 pm IME,

#1 -- Call Vanguard. They'll have you send in a death certificate. (get dozens of copies.) They'll walk you through splitting the account. It's easy. IME, the parent's brokerage split the account into two parts, one in each heir's name. Then the child's brokerage (for me, Vanguard), pulls the account over.
My understanding is that is best if the heirs contact Vanguard after the executor sends Vanguard the death certificate. Each will need to set up their own brokerage account and then each child's share of the parent's account will be transferred into their accounts. Make sure you note the share price on the date of the parents death to establish the stepped-up basis.
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