Advantages and Disadvantages of Joint Ownership of Estates (with Definitions)

Joint ownership itself may be structured in different ways, which may affect an estate plan. Each type of joint ownership structure offers an undivided right to the use and enjoyment of the property. However, depending on the specific classification of joint ownership, the ultimate consequences of transfer at a joint owner’s death may vary.

There are three basic ways to title a joint account, and each of them has distinct implications for estate planning, depending on your situation.

Joint Tenancy with Rights of Survivorship: When one owner dies, property ownership transfers to the surviving owner(s) through the rights of survivorship. Probate may be avoided on the death of the first joint owner of a jointly held account but not necessarily on the death of the surviving joint owner. This is because the asset that was originally jointly held may now be titled solely in the name of the surviving joint owner, hence resulting in a potential probate on the death of the surviving joint owner unless measures are taken to avoid that result.

Tenancy by Entirety: This is similar to joint tenancy with rights of survivorship, except that it applies only to married couples, which would include married same-sex couples in some states.

Tenancy in Common: Unlike joint tenancy with rights of survivorship, with tenancy in common, when a joint owner dies, that owner’s interest in the property will become part of the deceased owner’s estate and will be passed on according to his or her will. A word of caution: Be careful establishing a tenancy in common account, because it will likely lead to probate issues.

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Estate Planning Pitfall to Avoid: Transfer on Death & Payable on Death

Pitfall to Avoid: 

Transfer on Death (TOD) or Payable on Death (POD) Not Matching Wills

A simple and easy way to help avoid probate is to name someone as a transfer on death (TOD) beneficiary or a payable on death (POD) beneficiary. The terms are essentially the same but apply to slightly different accounts. A TOD/POD beneficiary can be named on financial accounts, such as bank savings or checking accounts and investment accounts, vehicle titles, and—in some states—real property.

Despite their simplicity, one major issue with TOD-/POD-titled assets is a lack of awareness or poor coordination with overall estate planning strategies. Some people might not realize that a TOD- or POD-titled asset overrides whatever is stated in a will. If a number of accounts are titled as TOD or POD, a will can be rendered largely ineffective, and assets may not be distributed as intended because the TOD/POD beneficiary designations don’t align with those established in the will.

Estate taxes may be due on TOD assets depending on, among other things, how the will is drafted. If there are tax issues, relying on TOD/POD beneficiary designations may not be enough, and a more complex estate plan may be needed.

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3 Estate Planning Must Dos...

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9 Key Questions to Ask at Annual Review Time

Top 10 Viewpoints of 2015

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As we head into 2016, Viewpoints unveils its first annual “Top 10” list, featuring the stories you rated most helpful during 2015. More than 95% of you who voted gave these pieces a “thumbs up” for helpfulness.

Which topics were the most useful? A quick glance at the list reveals an interest in estate planning, retirement income, Social Security, and how to navigate market volatility.

If you missed any of these popular pieces, now’s a great time to use them to help recharge your finances—and spirits—for the new year. Happy reading and our best wishes for a very prosperous 2016!

1.	Estate plan pitfalls to avoid

Do you know who your beneficiaries are, and how your assets are titled? These may seem like simple questions, but if you've spent many years accumulating bank and brokerage accounts, real estate, retirement accounts, annuities, and other assets, it’s not uncommon to forget or fail to update this important information. Find out why choosing the right accounts and forms of ownership is key—and how to get them right—in “Estate plan pitfalls to avoid.”

2.	Why establish an estate plan?

Having a plan for what happens with your savings, investments, real estate, and other assets after your death may not be something you want to think about. But estate planning is very important—after all, you have worked hard for what you have. Do you really want someone else to make decisions about the transfer of your assets? To find out why almost everyone may benefit from an estate plan, regardless of how much money they have, read “Why establish an estate plan?”

3.	Five ways to protect your retirement income

If you’re nearing or in retirement, it’s important to think about protecting what you've saved and ensuring that your income needs are met now and in the future. We’ve outlined five rules of thumb to help manage the risks to your retirement income. Read “Five ways to protect your retirement income.”

4.	How to spend from a 529 account

Year after year, you have been saving diligently for college through a 529 college savings account. Now college is closer and it’s time to think about spending the money you’ve put aside. You’ll be in control of how much is withdrawn and how it’ll be used, but there are a few things you need to know up front to make the most of your savings. Learn about a nine-step guide to help you make your 529 college savings go as far as possible in “How to spend from a 529 college plan.”

5.	New Social Security rules

The October budget agreement did more than authorize the federal government to engage in additional borrowing; it also changed the rules for claiming Social Security. Going forward, two claiming strategies that had given some couples the potential for higher lifetime benefits will no longer be available. Find out the details and how you may be affected in “New Social Security rules.”

6.	Pros' guide to diversification

Stock market swings in 2015 might have changed your mix of stocks and bonds. You may need to bring your portfolio back in line with a diversified mix that is appropriate for your situation. For help analyzing your overall portfolio, choosing a target investment mix, and rebalancing your portfolio to bring it in line with that mix, read “The pros’ guide to diversification” and visit our Planning & Guidance Center (log in required).

7.	Six strategies for volatile markets

Market volatility in late August and early September had investors concerned. Rather than focusing on the turbulence, wondering if you need to do something now, or what the market will do tomorrow, it makes more sense to focus on developing and maintaining a sound, long-term investing plan. Read our “Six strategies for volatile markets.”

8.	If you are a non-spouse IRA beneficiary

Retirement accounts pass directly to named beneficiaries, rather than becoming part of your estate. This can provide significant tax advantages for your heirs. If you are the son, daughter, brother, sister, or even a close friend of an IRA owner who has named you as his or her beneficiary, it's critical that you—and the owner of the IRA—understand the rules that govern IRA inheritances. If you are married, keep in mind that most employer-sponsored retirement plans automatically designate your spouse as the beneficiary unless your spouse has consented in writing to allow another primary beneficiary. For more details, read “If you are a non-spouse IRA beneficiary.”

9.	Looking for income

With 2015’s low interest rates and an uncertain outlook, many investors who were looking to generate current income—and could tolerate the extra risk—started considering non-bond income-generating investments. Among them: high-dividend-yielding stocks, preferreds, convertibles, and REITs. Find out more about a beyond-bonds income strategy in “Looking for income.”

10.	Putting the pullback into perspective

The sell-offs in the markets in late August were sharp—a 1,000 point intraday decline in the Dow Jones Industrial Average during trading on August 24 was the largest intraday point drop ever. Investors were anxious. A panel of Fidelity experts gathered for a webcast to discuss the latest market events. Watch the full replay of the webcast and get the key takeaways for investors in “Putting the pullback into perspective.”


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The Top 10 Retirement Challenges: #9. Estate Planning

While estate planning is less important for federal estate tax reasons, with the increase in the exemption amounts to over $5 million per person, the non-financial aspects of estate planning are still critical.

Making sure clients have a power of attorney updated and in place, and addressing the need for health care documents like a health care power of attorney and advance directive can be very important.

Trustee designations and naming the proper beneficiaries are often missed or not changed when life circumstances change.