Titling errors in brokerage accounts can undermine estate plans .
Most people assume that their wills are the ultimate guide on who gets their bank or brokerage accounts after they die. But a person’s last words may not, in fact, be the last word. An estate plan can be undermined by the way an account owner names, or titles, beneficiaries to their accounts. A will may say to divide an estate equally among three children. But if a particular account is titled to pass to just one, only that beneficiary will get the account.
Banking rules have long allowed people to title their accounts as payable on death to an individual or individuals. This allows, for example, a husband to get his wife’s account without going through probate. In the 1990s, states started to allow owners of brokerage accounts to do the same, using what is known as a transfer-on-death account. If no one is named on an account, it passes to heirs under the will. For that reason, some advisers discourage the use of such accounts; naming someone and then forgetting about it can cause problems years later.
