How to Re-Title Joint Accounts? (Community Prop State)

[Kookaburra]

I'm married and DH and I live in a community property state. We have joint investment accounts at both Vanguard and Fidelity that are currently titled JTWROS.

1. How do I go about re-titling these as Community Property with Right of Survivorship (CPWROS)?
2. Are there any tax implications to doing so?
3. For accounts titled CPWROS, is it correct that upon the death of either spouse, the entire account gets a full step-up in cost basis for the surviving spouse?

Thank you.

[elgob]

I did this earlier this year at Vanguard. Wanted to do it at Fidelity too but they didn't offer CPWROS registration.

#1. At Vanguard: They don't retitle the JTWROS account. You have to open a new account with the CPWROS registration then transfer the assets IN KIND from the old JTROS account to the new CPWROS account.

#2. No tax implications as long as you transfer IN KIND ... i.e., transfer the shares from one account to the other. That's not a sale, so no capital gains/losses realized. Make sure Vanguard correctly carries over the basis info from the old account to the new account.

#3. Correct: when one spouse dies, basis is stepped-up on both halves of CP, the decedent's half and the survivor's half.

[One Ping]

I'm married and DH and I live in a community property state. We have joint investment accounts at both Vanguard and Fidelity that are currently titled JTWROS.

1. How do I go about re-titling these as Community Property with Right of Survivorship (CPWROS)?
2. Are there any tax implications to doing so?
3. For accounts titled CPWROS, is it correct that upon the death of either spouse, the entire account gets a full step-up in cost basis for the surviving spouse?

Thank you.

Never heard of CPWROS. What are the differences between CPWROS and JTWROS?

Asked and answered ...
Difference Between Community Property with Rights of Survivorship vs. Joint Tenancy

[runninginvestor]

I had this same question last nigh (didn't ask yet, but was still researching it here, messaged VG, etc.). Found this site with a ton of information that helped:
https://www.stlawfirm.com/publications/ ... ger-state/

Eigob's reply is in line with what I've found ad well.

[runninginvestor]

I did this earlier this year at Vanguard. Wanted to do it at Fidelity too but they didn't offer CPWROS registration.

#1. At Vanguard: They don't retitle the JTWROS account. You have to open a new account with the CPWROS registration then transfer the assets IN KIND from the old JTROS account to the new CPWROS account.

#2. No tax implications as long as you transfer IN KIND ... i.e., transfer the shares from one account to the other. That's not a sale, so no capital gains/losses realized. Make sure Vanguard correctly carries over the basis info from the old account to the new account.

#3. Correct: when one spouse dies, basis is stepped-up on both halves of CP, the decedent's half and the survivor's half.

elgob or OP, when you did this at vanguard did you do it all online? If so, VG only lists "exchange" when transferring from the old account to the new account. VG rep seems to give a "yeah, that will be transferred in-kind, i assure you" response, but the "exchange" option elsewhere at VG involves buying and selling.

Does this "exchange" selection between old/new taxable acct ring a bell with what you may have done?

[mogg]

elgob or OP, when you did this at vanguard did you do it all online? If so, VG only lists "exchange" when transferring from the old account to the new account. VG rep seems to give a "yeah, that will be transferred in-kind, i assure you" response, but the "exchange" option elsewhere at VG involves buying and selling.

Does this "exchange" selection between old/new taxable acct ring a bell with what you may have done?

Vanguard's interface is quite confusing. Yes the rep is correct, and yes you would expect to be nervous since a normal exchange would be disastrous. I successfully completed an online in-kind transfer yesterday. Here is a detailed, though dated response to my inquiry from a Vanguard rep:

Thank you for taking the time to contact us.

Since you only have Vanguard mutual funds in the account that you would
like to transfer from, you can transfer the funds either through exchanges
or by completing our Change of Ownership Form.

To exchange money between Vanguard(R) mutual funds, follow these steps:

1. Log on to your account at vanguard.com.
2. From the "My Accounts" dropdown, select "Buy & sell."
3. Select "Exchange Vanguard funds" and follow the instructions.

You will need to submit an exchange for each fund separately. When you
exchange between nonretirement accounts, as long as you are exchanging from
one fund and into the same fund in the other account, it is considered a
transfer and is not a taxable event.

You can also change the ownership of assets in your Vanguard account to
another Vanguard account by completing our Change of Ownership Between
Vanguard Nonretirement Accounts Form.

When you transfer ownership of the account, we will discontinue all account
options and transfer the assets to the requested account. You can locate
the Change of Ownership Between Vanguard Nonretirement Accounts Form at:

https://personal.vanguard.com/us/litera ... _mode=true

As you complete the form, please keep this point in mind:

* Since the owners on the two accounts are the same, all current account
owners must sign the Change of Ownership Between Nonretirement Accounts
Form, but a signature guarantee is not needed.

Once the account has a zero balance, you can close it by following the
steps below:

1. Log on to your account at vanguard.com.
2. From the “My Accounts” dropdown, select “Account maintenance.”
3. Under “Personal profile," select “Close account.”
4. Select the account you wish to close and follow the instructions.

Once the account closes, you will no longer see it on your "Balances &
holdings" page when you log in at vanguard.com. However, you will still
have access to your transaction history, statements, and tax forms once the
account is closed.

Please note that certain criteria may prevent you from closing your
brokerage account such as:

* Holdings in the account.
* Available balance.
* A pending incoming transfer.
* An RMD service set up for the account.
* An open order in the account.

If you have additional questions, our “Contact us” page is located at:

https://personal.vanguard.com/web/cf/se ... ontact-us/

[Big Dog]

I did this earlier this year at Vanguard. Wanted to do it at Fidelity too but they didn't offer CPWROS registration.

#1. At Vanguard: They don't retitle the JTWROS account. You have to open a new account with the CPWROS registration then transfer the assets IN KIND from the old JTROS account to the new CPWROS account.

#2. No tax implications as long as you transfer IN KIND ... i.e., transfer the shares from one account to the other. That's not a sale, so no capital gains/losses realized. Make sure Vanguard correctly carries over the basis info from the old account to the new account.

#3. Correct: when one spouse dies, basis is stepped-up on both halves of CP, the decedent's half and the survivor's half.

I did this a couple of years ago at Vanguard. Just called my Flag Rep and he setup a new account # and registration and then a couple of days later, he initiated a transfer of everything over in-kind. All basis went correctly.

Easy.

[runninginvestor]

Thank you for the confirmation that you did this. Man, their response was way more detailed than they provided me over the phone and through their message.

[Kookaburra]

elgob or OP, when you did this at vanguard did you do it all online? If so, VG only lists "exchange" when transferring from the old account to the new account. VG rep seems to give a "yeah, that will be transferred in-kind, i assure you" response, but the "exchange" option elsewhere at VG involves buying and selling.

Does this "exchange" selection between old/new taxable acct ring a bell with what you may have done?

Vanguard's interface is quite confusing. Yes the rep is correct, and yes you would expect to be nervous since a normal exchange would be disastrous. I successfully completed an online in-kind transfer yesterday. Here is a detailed, though dated response to my inquiry from a Vanguard rep:

Thank you for taking the time to contact us.

Since you only have Vanguard mutual funds in the account that you would
like to transfer from, you can transfer the funds either through exchanges
or by completing our Change of Ownership Form.

To exchange money between Vanguard(R) mutual funds, follow these steps:

1. Log on to your account at vanguard.com.
2. From the "My Accounts" dropdown, select "Buy & sell."
3. Select "Exchange Vanguard funds" and follow the instructions.

You will need to submit an exchange for each fund separately. When you
exchange between nonretirement accounts, as long as you are exchanging from
one fund and into the same fund in the other account, it is considered a
transfer and is not a taxable event.

You can also change the ownership of assets in your Vanguard account to
another Vanguard account by completing our Change of Ownership Between
Vanguard Nonretirement Accounts Form.

When you transfer ownership of the account, we will discontinue all account
options and transfer the assets to the requested account. You can locate
the Change of Ownership Between Vanguard Nonretirement Accounts Form at:

https://personal.vanguard.com/us/litera ... _mode=true

As you complete the form, please keep this point in mind:

* Since the owners on the two accounts are the same, all current account
owners must sign the Change of Ownership Between Nonretirement Accounts
Form, but a signature guarantee is not needed.

Once the account has a zero balance, you can close it by following the
steps below:

1. Log on to your account at vanguard.com.
2. From the “My Accounts” dropdown, select “Account maintenance.”
3. Under “Personal profile," select “Close account.”
4. Select the account you wish to close and follow the instructions.

Once the account closes, you will no longer see it on your "Balances &
holdings" page when you log in at vanguard.com. However, you will still
have access to your transaction history, statements, and tax forms once the
account is closed.

Please note that certain criteria may prevent you from closing your
brokerage account such as:

* Holdings in the account.
* Available balance.
* A pending incoming transfer.
* An RMD service set up for the account.
* An open order in the account.

If you have additional questions, our “Contact us” page is located at:

https://personal.vanguard.com/web/cf/se ... ontact-us/

You mentioned that you successfully conducted an online, in-kind exchange recently. Could you elaborate? Was this for the specific situation at-hand, ie, moving from a JWROS to a CPWROS account? Were the mechanics of doing it exactly the same as described in your more dated message from Vanguard?

I have had poor experiences recently with Vanguard customer service phone reps, to the point where I’m no longer able to trust when they say something like “don’t worry, exchanging between accounts won’t trigger a sell-buy tax hit.” So if possible, I’d like to do this online, and thus am relying on the experiences of others as a guide on what/how to do it. Thank you for any additional details you can provide.

[mogg]

You mentioned that you successfully conducted an online, in-kind exchange recently. Could you elaborate? Was this for the specific situation at-hand, ie, moving from a JWROS to a CPWROS account? Were the mechanics of doing it exactly the same as described in your more dated message from Vanguard?

I have had poor experiences recently with Vanguard customer service phone reps, to the point where I’m no longer able to trust when they say something like “don’t worry, exchanging between accounts won’t trigger a sell-buy tax hit.” So if possible, I’d like to do this online, and thus am relying on the experiences of others as a guide on what/how to do it. Thank you for any additional details you can provide.

This is an unfortunate example of how Vanguard's interface is not intuitive. In order to do a transfer, you have to do an exchange. My use case is the same as yours - convert JT TEN WROS to COMM PROP WROS.

Steps:
- Make sure you already have a community property account, if not open a new one
- In the Holdings page, click the "Transact" dropdown for your source account and select "Exchange (sell to buy) Vanguard funds". (Note: we are not planning on selling to buy, this is a defect in the user interface)
- In "Where's the money coming from?", select the mutual fund you want to transfer
- If you have multiple lots, select all the lots
- Press the "continue" button
- In "Where's the money going?", select your community property account, and check the checkbox by your existing mutual fund or add a new mutual fund. Make sure that the target mutual fund is the same exact mutual fund as the source.
- Press the "continue" button
- Continue through the wizard and complete your transaction.

Again, it is very confusing that we are doing an exchange to transfer funds. As long as the source and target funds are the same, the funds should be transferred rather than exchanged.

To be fair, Fidelity doesn't have a great interface for changing account registrations either, but at least it is clear on the difference between an exchange and a transfer.

[surfstar]

During our recent mortgage refi's we had to adamantly demand that the deed be corrected to continue our same holding as "community property with right of survivorship". This is in CA, where it can actually have a measurable tax advantage. The title processor didn't know the difference and seemed surprised that we cared so much.

So, just a reminder to watch closely on your mortgage/refi paperwork - for some reason they like to default to JTWROS when there are co-borrowers (despite being married and in a community property state).

[runninginvestor]

Update on my experience:

I did the transfer by phone (fortunately I've had good luck getting ahold of VG). The rep assured me an online "exchange" would suffice as the owners on both accounts were the same, but she could just do it to.
I had to open the new joint CPWROS titled account.
They transferred the assets. It took about 3 business days.
It appears to have gone through as a transfer and not an exchange as the details for the transaction list, "Transaction type - Transfer (In)" (I'll report back at tax time if they flubbed it).

Oddly, the detailed transaction looks like they accomplished it by mail.... so I'd bet the online transfer would be faster. "Transaction method - Mail"
I also did not receive any online confirmation that the transfer was initiated or in progress when I did it b phone until 3 business days later when it showed as Pending in the transaction activity list.

[Kookaburra]

You mentioned that you successfully conducted an online, in-kind exchange recently. Could you elaborate? Was this for the specific situation at-hand, ie, moving from a JWROS to a CPWROS account? Were the mechanics of doing it exactly the same as described in your more dated message from Vanguard?

I have had poor experiences recently with Vanguard customer service phone reps, to the point where I’m no longer able to trust when they say something like “don’t worry, exchanging between accounts won’t trigger a sell-buy tax hit.” So if possible, I’d like to do this online, and thus am relying on the experiences of others as a guide on what/how to do it. Thank you for any additional details you can provide.

This is an unfortunate example of how Vanguard's interface is not intuitive. In order to do a transfer, you have to do an exchange. My use case is the same as yours - convert JT TEN WROS to COMM PROP WROS.

Steps:
- Make sure you already have a community property account, if not open a new one
- In the Holdings page, click the "Transact" dropdown for your source account and select "Exchange (sell to buy) Vanguard funds". (Note: we are not planning on selling to buy, this is a defect in the user interface)
- In "Where's the money coming from?", select the mutual fund you want to transfer
- If you have multiple lots, select all the lots
- Press the "continue" button
- In "Where's the money going?", select your community property account, and check the checkbox by your existing mutual fund or add a new mutual fund. Make sure that the target mutual fund is the same exact mutual fund as the source.
- Press the "continue" button
- Continue through the wizard and complete your transaction.

Again, it is very confusing that we are doing an exchange to transfer funds. As long as the source and target funds are the same, the funds should be transferred rather than exchanged.

To be fair, Fidelity doesn't have a great interface for changing account registrations either, but at least it is clear on the difference between an exchange and a transfer.

Thank you! This is helpful. See one post above from runninginvestor, who did it by phone with a Vanguard CS rep. They noted that their transaction ledger says “Transfer - In”. Since you did yours online, I’m curious if yours says the same, or if it says “exchange”?

[mogg]

Thank you! This is helpful. See one post above from runninginvestor, who did it by phone with a Vanguard CS rep. They noted that their transaction ledger says “Transfer - In”. Since you did yours online, I’m curious if yours says the same, or if it says “exchange”?

The transaction type destination account is "Transfer (incoming)". More importantly, the original basis was retained.

[runninginvestor]

Thank you! This is helpful. See one post above from runninginvestor, who did it by phone with a Vanguard CS rep. They noted that their transaction ledger says “Transfer - In”. Since you did yours online, I’m curious if yours says the same, or if it says “exchange”?

The transaction type destination account is "Transfer (incoming)". More importantly, the original basis was retained.

That reminded me to check the basis. My overall basis was retained except the new account I had to re-specify the type of basis, it defaulted to average cost after the transfer. I just switched it to my preferred SpecID method - what it was before the transfer - so we will see in a few days if they reflect this correctly.

As a note for future folks who stumble on this thread: these were all covered shares, always held at VG. I did download the transaction report to verify basis if they messed it up, hopefully I don't have to use it.

[Edit: Update on SpecID] After switching, it only took about an hour for the SpecID cost basis to be reflected on the new account and the lots look correct.

[heidim]

What's the importance of re-titling accounts to be CPWROS? Spouse and I, and also in-laws who we help, live in a community property state. Community property works well for both couples, since there are no prior marriages, children, or separate assets. I don't remember seeing an option for a community property joint account type when I opened ours and helped in-laws with theirs. In-laws account is on the new platform and shows JTWROS, but our joint account is still on the old platform and doesn't indicate one way or the other.

Does the Vanguard account designation make any difference when one spouse dies? I assumed the state/federal laws were the authority on the step-up in cost basis, not a label on the investment account.

[Eric]

What's the importance of re-titling accounts to be CPWROS? Spouse and I, and also in-laws who we help, live in a community property state. Community property works well for both couples, since there are no prior marriages, children, or separate assets. I don't remember seeing an option for a community property joint account type when I opened ours and helped in-laws with theirs. In-laws account is on the new platform and shows JTWROS, but our joint account is still on the old platform and doesn't indicate one way or the other.

Does the Vanguard account designation make any difference when one spouse dies? I assumed the state/federal laws were the authority on the step-up in cost basis, not a label on the investment account.

The answer may depend on *which* community property state. In Texas, assets are presumed to be community property without having to title the assets in a special way. In other community property states, the answer may be different.

[surfstar]

What's the importance of re-titling accounts to be CPWROS?

Review the links in posts 3 and 4 of this thread.

[Iorek]

During our recent mortgage refi's we had to adamantly demand that the deed be corrected to continue our same holding as "community property with right of survivorship". This is in CA, where it can actually have a measurable tax advantage. The title processor didn't know the difference and seemed surprised that we cared so much.

So, just a reminder to watch closely on your mortgage/refi paperwork - for some reason they like to default to JTWROS when there are co-borrowers (despite being married and in a community property state).

This might be going offtopic but I wouldn’t think a mortgage refi could affect your deed? I would have thought your ownership was recorded when you purchased the home and the refi only affects liens on the property.

[Eric]

What's the importance of re-titling accounts to be CPWROS?

Review the links in posts 3 and 4 of this thread.

But be aware that not all of the information in those links will be accurate in Texas. An account here that is registered as "joint tenants with right of survivorship" will still be recognized as community property, absent other evidence that it isn't.

[runninginvestor]

But be aware that not all of the information in those links will be accurate in Texas. An account here that is registered as "joint tenants with right of survivorship" will still be recognized as community property, absent other evidence that it isn't.

That's likely good advice. The link I posted was geared towards MN (and WI because of the proximity being comm prop as well) with ancillary information to other comm prop states.

[heidim]

Our state of interest is Washington. I read both links earlier in the thread, and I understand the generalities of community property. The real question is whether the account designation at Vanguard overrides the community property designations/assumptions of state law. It had never occurred to me that it would, but if it does, then I need to change both our and in-laws joint taxable accounts.

Washington state law seems to state it pretty clearly, so I'm guessing it's like Texas, that the account designation doesn't override this definition.

"Property not acquired or owned, as prescribed in RCW 26.16.010 and 26.16.020, acquired after marriage or after registration of a state registered domestic partnership by either domestic partner or either husband or wife or both, is community property. "

The referenced RCWs are referring to inherited property that qualifies as separate property.

https://app.leg.wa.gov/rcw/default.aspx?cite=26.16.030

[surfstar]

During our recent mortgage refi's we had to adamantly demand that the deed be corrected to continue our same holding as "community property with right of survivorship". This is in CA, where it can actually have a measurable tax advantage. The title processor didn't know the difference and seemed surprised that we cared so much.

So, just a reminder to watch closely on your mortgage/refi paperwork - for some reason they like to default to JTWROS when there are co-borrowers (despite being married and in a community property state).

This might be going offtopic but I wouldn’t think a mortgage refi could affect your deed? I would have thought your ownership was recorded when you purchased the home and the refi only affects liens on the property.

Good question - I had to review the docs and discuss with DW - we remember it being an issue with the loan docs not matching our Grant Deed for our names; one had initials vs one not, or something. And it was easier for them to not redraft all the docs. Annoying, as we then caught the JT vs CP issue, and had to sort that out also. Otherwise, I don't see why the Grant Deed would be altered during a refi, vs only the Trust Deed.

I confirmed via looking up the County records - only for the one refi was a Grant Deed and Trust Deed recorded, the other was just a Trust Deed. So they messed up and we didn't know enough during our first refi to tell them to fix their docs instead of filing a Grant Deed that matched their naming. It did alert us to the issue of JT vs CP, though. So we did learn something (and we also alerted the Title Co to pay attention to that for CA properties, as it can be impactful)

Here was the CA relevant info that we used to ensure our Grant Deed remained titled correctly: https://www.snyderlawpc.com/beware-of-t ... your-home/

[Soon2BXProgrammer]

Our state of interest is Washington. I read both links earlier in the thread, and I understand the generalities of community property. The real question is whether the account designation at Vanguard overrides the community property designations/assumptions of state law. It had never occurred to me that it would, but if it does, then I need to change both our and in-laws joint taxable accounts.

Washington state law seems to state it pretty clearly, so I'm guessing it's like Texas, that the account designation doesn't override this definition.

"Property not acquired or owned, as prescribed in RCW 26.16.010 and 26.16.020, acquired after marriage or after registration of a state registered domestic partnership by either domestic partner or either husband or wife or both, is community property. "

The referenced RCWs are referring to inherited property that qualifies as separate property.

https://app.leg.wa.gov/rcw/default.aspx?cite=26.16.030

Do not count on this. Especially if your in Washington and if one spouse dies the other spouse would have an estate over $2.1M(ish) dollars as Washington doesn't have an estate tax exemption that is portable from one spouse to the other. If the second spouse ends up with over $2.1 then they will have to pay an estate tax in Washington.

Depending on the asset size one might choose to NOT hold investment as CPWROS, but in a different form.

[Retired1809]

My wife and I are in the process of creating living (revocable) trusts and our lawyer has asked us to identify assets that each of us will contribute to the trusts. Most of our securities are registered in my name alone while few are in my wife's name. I'm planning to have a significant holding in a JTROS account retitled in my wife's name so that she can contribute it to her trust.

Our attorney sent us home to decide on (a) assets to contribute to our trusts and (b) specific bequests. We've made decisions on bequests but are struggling to decide on which assets to contribute. Does this sound like we're on the right track?

[Triple-Nickels]

During our recent mortgage refi's we had to adamantly demand that the deed be corrected to continue our same holding as "community property with right of survivorship". This is in CA, where it can actually have a measurable tax advantage. The title processor didn't know the difference and seemed surprised that we cared so much.

So, just a reminder to watch closely on your mortgage/refi paperwork - for some reason they like to default to JTWROS when there are co-borrowers (despite being married and in a community property state).

snip (sorry, I incorrectly edited original threads by accident) ...
This might be going off topic but I wouldn’t think a mortgage refi could affect your deed? I would have thought your ownership was recorded when you purchased the home and the refi only affects liens on the property.
[/quote]

Good question - I had to review the docs and discuss with DW - we remember it being an issue with the loan docs not matching our Grant Deed for our names; one had initials vs one not, or something. And it was easier for them to not redraft all the docs. Annoying, as we then caught the JT vs CP issue, and had to sort that out also. Otherwise, I don't see why the Grant Deed would be altered during a refi, vs only the Trust Deed.

I confirmed via looking up the County records - only for the one refi was a Grant Deed and Trust Deed recorded, the other was just a Trust Deed. So they messed up and we didn't know enough during our first refi to tell them to fix their docs instead of filing a Grant Deed that matched their naming. It did alert us to the issue of JT vs CP, though. So we did learn something (and we also alerted the Title Co to pay attention to that for CA properties, as it can be impactful)

Here was the CA relevant info that we used to ensure our Grant Deed remained titled correctly: https://www.snyderlawpc.com/beware-of-t ... your-home/
[/quote]

My post starts here: Interesting discussion ... I have a few questions for you to see how your situation described above could impact my current situation. I reviewed both links you recommended (post 3 and also above), but still don't have a clear picture as to whether my assets are optimally and/or correctly titled. I'm a CA resident as well, and primarily focused on ensuring title to all assets are held correctly, so full step up in basis occurs upon the death of first spouse, and stepped up again upon death of second spouse (assuming this is even possible).
1. Do you have a revocable living trust (RLT)? If yes, then did you record your grant deed and/or your refinanced deed of trust in the name or your Trust, or CPWROS?
2. Is there a difference to full stepped up basis on assets (real estate and brokerage accounts) when assets are held in RLT vs CPWROS?

For anyone else who wants to weigh in, my current situation is below. Trying to figure out if I need to change current title or account ownership to any of these (RLT vs CPWROS vs JTWROS):
1. Own 2 properties (primary has no mortgage; 2nd home has a small mortgage) - grant deed for both are titled in the Trust, and deed of trust on 2nd home is also listed as the RLT.
2. RLT is "account owner" of Brokerage and bank accounts
3. RLT is beneficiary of life insurance policies
4. Retirement accounts - IRAs and 401Ks - at Fidelity (spouse named primary beneficiary, kids named secondary beneficiaries)