An investment account can transfer fairly easily, as long as you designate a beneficiary and consider his or her ability to manage the account.
On a nonretirement account, designating a beneficiary or beneficiaries establishes a transfer on death (TOD) registration for the account. For an individual account, a TOD registration generally allows ownership of the account to be transferred to the designated beneficiary upon your death.
Do investment accounts pass through probate?
NO, generally, as long as the TOD designation is in place. Keep in mind that if the will stipulates anything about such accounts, the named beneficiaries on the accounts take precedence over anything stated in the will and the assets will be distributed to the named beneficiaries.
YES, if there are no TOD beneficiaries named on the account or if there is a complication with the named beneficiary. For example, if the named beneficiary has passed away first and the designation was never updated, the account will be subject to probate.
For joint ownership with right of survivorship or tenants by entirety accounts, the joint registration transfers account ownership upon the first death, usually directly to the surviving accountholder. TOD becomes effective for joint accounts if both owners pass away simultaneously.
Joint and TOD registration generally allow an account to pass outside the probate estate, enabling the surviving owner or beneficiaries to avoid the time and expense of that process for this account.
Regardless of the account type, estate taxes may be assessed on your taxable estate. Be sure to consult with your attorney or tax advisor to discuss ways to minimize or eliminate estate taxes.
Can the beneficiary manage an investment account?
Not everyone may be comfortable managing an investment account on their own. If you think your beneficiaries may prefer not to take on the responsibility, consider placing the account in a trust or arranging for professional management.
If one of your beneficiaries is a charity, donating complex assets such as certain types of securities may have tax advantages for both parties. In addition, donor-advised funds can help the charity manage such assets if it lacks the expertise. For more on this topic, see Strategic giving: thinking beyond cash donations in Fidelity Viewpoints®.
