The nomenclature used to title accounts can be daunting and quite frankly downright confusing. After creating trusts for our clients, we review our client’s financial accounts and advise them as to which accounts need to be transferred to the trust. It is a common misconception that accounts “in trust for” another individual are in a trust, but this is inaccurate. Let’s review some of the more common forms of ownership.
Probably the most common form of account ownership is joint ownership. There are two forms of joint ownership when dealing with financial accounts: joint tenancy with rights of survivorship (“JTWROS”) and tenancy in common (“TIC”). JTWROS means that when one account owner dies, the account automatically transfers to the surviving joint owner. TIC means that when one account owner dies, that deceased owner’s share of the account passes pursuant to the terms of the decedent’s estate planning documents, meaning it does not automatically pass to the surviving owner. In New York, there is a third form of joint ownership exclusive to real property owned by husband and wife called tenancy by the entirety. It is very similar to JTWROS with added creditor protection to each spouse.
Where an individual owns financial accounts with no joint owner, it is common to title the account so that it passes to a beneficiary upon death similar to a jointly owned account. To accomplish this, title to the account might be changed to “transfer on death” or “in trust for”. Like a beneficiary designation that you would see on a life insurance policy or retirement account, this type of designation will accomplish the goal of transferring assets to another individual upon your death without naming them as a joint owner during your lifetime.
“Transfer on death” and “in trust for” designations should not be confused with placing assets into a trust. For instance, if you create a revocable trust or a Medicaid Trust, you need to attend to retitling the assets intended to be owned by the Trust. This means that you need to go to your financial advisor an open a new account in the name of the trust. Too often, this final step is neglected which defeats the purpose of the trust.
The above is a good example of why you should work with an elder law, estate planning and special needs planning attorney. While it is never advisable to draft documents on your own, the advice we give regarding the ministerial and tangential tasks associated with carrying out your estate plan can mean the difference between putting your estate plan into effect and having a worthless piece of paper. We can be reached at 914-925-1010 or by e-mail at smd@mfd-law.com. You are also encouraged to visit our website at www.plantodayfortomorrow.com. Questions may be submitted to smd@mfd-law.com for a response.
