Planning For Your Assets in California - FAQs
Many clients have questions about account ownership and asset management. Understanding how accounts are titled and who has access to them isn't just about convenience—it's about ensuring your assets transfer smoothly to your loved ones while protecting them from potential risks.
Joint Ownership vs. Transfer-on-Death (TOD) Designations
Joint ownership with right of survivorship means two people share equal access and control over an account or property while both are alive. When one person passes away, the survivor automatically becomes the sole owner. While this can make things simpler, it also introduces risks: either owner can withdraw all funds at any time, and the account could be exposed to creditors or legal claims against either owner.
In contrast, a transfer-on-death (TOD) or payable-on-death (POD) designation keeps you in full control during your lifetime. Your named beneficiary has no rights to the account until your death, at which point the assets pass directly to them, bypassing probate. This arrangement prevents others from accessing your assets while you’re alive and avoids the delays and costs of probate after your passing.
Keep in mind, whether you add a joint owner or name a beneficiary, that individual will receive the entire account balance after your death, regardless of age or family circumstances. This can sometimes lead to family disputes, especially if one sibling inherits everything and others are left out.
Do You Still Need a Trust If You Use Joint Ownership or TOD/POD?
Relying solely on joint ownership or TOD/POD designations instead of a trust can create complications. Jointly held property is vulnerable to the creditors of either owner. With TOD/POD, while you avoid some of those risks, these designations only take effect upon death—not if you become incapacitated. There’s also the possibility of assets ending up in probate if, for example, your beneficiary predeceases you or dies simultaneously in an accident, and you haven’t updated your designations. In such cases, state law determines who inherits, which may not align with your wishes.
Setting up a trust and transferring ownership of your assets to it can help you avoid these pitfalls. A trust ensures your property is managed and distributed according to your instructions, both during incapacity and after death, and does so privately.
What Happens to Retirement Accounts and Life Insurance After Death?
Retirement accounts and life insurance policies pass directly to the beneficiaries you’ve named, bypassing probate and any instructions in your will, as long as your beneficiaries are adults and capable of managing their own finances. That’s why it’s vital to keep these designations current. Outdated or missing beneficiary information can result in assets going to unintended recipients or being tied up in probate. If a minor is named as beneficiary, the assets will be held by the court until the child reaches adulthood.
Why You Need an Asset Inventory
Maintaining a current inventory of your assets is crucial. Without one, your family may struggle to locate your accounts or property, potentially resulting in assets being turned over to the state as unclaimed property. According to the National Association of Unclaimed Property Administrators, about one in seven Americans have unclaimed assets, totaling approximately $77 billion. To ensure your assets go to your chosen heirs or charities, keep a detailed, updated inventory.
How Often Should You Update Your Inventory and Designations?
Review your asset inventory and beneficiary designations regularly, especially after major life events such as:
Marriage or divorce
Birth or adoption of a child
Death of a beneficiary
Buying or selling significant assets
Relocating to another state
Starting a business
Retirement
Organizing and Storing Your Asset Information
Develop a clear and organized system for storing your asset information, making it accessible to trusted individuals if something happens to you. Avoid listing sensitive details like passwords in your will, as it becomes public record after your death. Instead, store this information securely and inform your trusted family members, executor, or trustee how to access it. By taking these steps, you can protect your assets, minimize family disputes, and ensure your wishes are honored.
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This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal, or investment advice.
