Tigran Unciano, CFA is a Private Wealth Manager. He specializes in helping families manage their financial affairs when they experience a loss in the family. He also helps families prepare for the anticipated passing of a loved one.

Tigran helps families through the process of taking control of accounts and applying for income benefits. He also provides on-going financial management to ensure that families have enough income to support themselves. Please call Tigran at 602-852-5522 for a free consultation if you have recently lost someone, or expect to lose a family member in the near future.

In the previous article, Tigran discussed inheriting an IRA or 401(k) account. In the next article, Tigran will discuss life insurance and annuities.

Financial Tips for Life after Loss:  Inheriting Non-IRA Investment Accounts

What happens to bank accounts or non-IRA investment accounts after someone dies? The answer depends on how those accounts were registered or titled when that person was alive. You may think the money in those accounts goes to whoever is named in the will. This is true if the accounts were titled solely in the name of the deceased person. If the accounts were titled jointly with another person, the money passes directly to that person without going through probate, the court-supervised process carrying out a will.

The focus of this piece is on inheriting accounts titled as joint tenants with rights of survivorship (“JTWROS”), accounts titled as community property, and accounts titled solely in the name of one person. These are the most common forms of account titling.

Joint Tenants with Rights of Survivorship

There are several factors to consider when titling an account as JTWROS. For this article, we will assume that these factors were considered and that JTWROS was determined to be the best way to title an account. After the death of one of the account holders, the surviving account owner automatically inherits the entire value of the account regardless of what the will states. The surviving account holder must show proof of the first account holder’s death, typically by providing a copy of a death certificate. In some cases, the surviving account holder may have to fill out a new account application and a form to move the money into a new account titled just in their name. In other cases, a form must be filed out to remove the name of the deceased account holder from the account.

It is important to realize that taxes may be due on the amount of money inherited. Consulting with a financial professional or estate attorney can help determine if this will be the case. If taxes are due, it is important to have funds available to pay the tax.

Community Property

Community property laws only apply to married couples and are effective in 10 states, including Arizona. Community property is essentially any property acquired by a married couple after they have been married. For bank accounts and non-IRA investment accounts this is the case, even if the account does not name both spouses as joint owners. When one spouse dies, the surviving spouse inherits half of the value of a community property account and the other half passes through probate before eventually going to the ultimate recipient. A deceased spouse can name who will inherit their half of the community property and it can be anyone, not necessarily the surviving spouse.

If you are inheriting community property as the surviving spouse, again you must provide a death certificate as proof of death. You must also provide instructions for where to move your half of the amount, instructions to convert the community property account to an account in your name only, and potentially a new account application with some supporting documents. Many institutions have forms that satisfy these requirements.

If you are inheriting community property and you are not the surviving spouse, there are several additional steps to take and it generally takes longer before you receive your inheritance. Once a death certificate is obtained, a person in charge of distributing the inheritance is identified or chose by the probate court. A separate estate account is then opened, which is used to pay final expenses, taxes, and other items. After all expenses are paid, the person in charge of the estate will distribute the remaining money to the persons named in the deceased person’s will. At that point, a new account can be opened in the name of the person receiving the inheritance, where the money can be deposited and used.

Sole Ownership

When a person dies as the sole owner of a bank account or non-IRA investment account, the account is inherited according to the will of the deceased person and must go through probate, the court supervised process of administering a valid will. What that means is that first, a death certificate is provided, proving the death of the account holder. Then a person in charge of executing the will is chosen, either by the deceased person before he or she died, or by the court itself. Next an estate account is opened where the money is first received. The person in charge of the estate is responsible for paying all the final expenses, taxes and then, distributing what is left to the persons named in the will. At the time the inheritance is to be distributed, a new account application must be completed and finally, the person who is to receive the inheritance gets the money deposited into his or her new account. All this is done under the court’s supervision, which is part of the reason the process is so time consuming.

Then What?

After a bank account or non-IRA investment account has been transferred to the person inheriting it, either by will or survivorship right, the money is now that person’s to use without restriction. In many cases, it is advisable to seek professional advice about how to use those assets, in order to maximize the benefit one receives from the inheritance. Proper planning with one’s inheritance can stretch its value for many years beyond the death of the person who originally left it.

Questions, comments, feedback? Call Tigran at 602-852-5522.

Please remember that due to various factors, including changing market conditions, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this newsletter (article) serves as the receipt of, or as a substitute for, personalized investment advice from Hatton Consulting, Inc. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. A copy of our current written disclosure statement discussing our advisory services and fees is available for review upon request. Some content provided by Forefield Inc. Forefield Inc. does not provide legal, tax, or investment advice. All content provided by Forefield is protected by copyright. Forefield is not responsible for any modifications made to its materials, or for the accuracy of information provided by other sources.

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