Quick Answer
Account titling and estate tools decide who controls assets and who inherits them. Joint Tenants with Right of Survivorship (JTWROS), Tenancy by the Entirety (TBE), and community property skip probate; Tenants in Common (TIC) does not. Revocable trusts avoid probate only; irrevocable trusts also cut estate tax. Beneficiary designations and transfer-on-death (TOD) accounts override a will.
The whole unit on one sheet: ownership forms, trusts and wills, beneficiary designations, and the tax and probate rules the exam loves.
The One-Liners That Win Points
- Joint Tenants with Right of Survivorship (JTWROS) passes to survivors automatically and avoids probate; any owner can trade or liquidate without the others' consent.
- Tenants in Common (TIC) has NO right of survivorship: a deceased owner's share goes to their estate and requires probate. The owner's will controls it, not the account title.
- Tenancy by the Entirety (TBE) is married couples only, needs both spouses to consent to any transfer, and gives the strongest creditor protection.
- Community Property with Right of Survivorship (CPWROS) exists only in community property states and passes to the surviving spouse.
- Revocable living trust: avoids probate, but assets stay in the taxable estate and the grantor pays the income tax; becomes irrevocable at death.
- Irrevocable trust: removes assets from the estate (estate tax savings) and gives asset protection, but the grantor gives up all control; the trust is a separate tax entity.
- Inter vivos (living) trusts avoid probate; testamentary trusts are created by a will and DO go through probate.
- Testate = died with a valid will; intestate = no will, state law controls.
- Beneficiary designations and TOD / pay-on-death (POD) accounts override a will in all cases.
- A qualified domestic relations order (QDRO) divides employer plans (401(k), 403(b), pension) in a divorce and waives the early withdrawal penalty; IRAs use a "transfer incident to divorce" and need no QDRO.
- Donor advised fund (DAF): irrevocable contribution, immediate deduction, then advisory grants; no required payout timeline.
Numbers to Lock In
| Item | Value |
|---|---|
| Irrevocable trust top bracket (retained income) | 37% bracket at about $16,000 |
| DAF cash contribution deduction | up to 60% of adjusted gross income (AGI) |
| DAF appreciated securities (held > 1 year) deduction | fair market value, up to 30% of AGI |
| DAF excess deduction carryforward | up to 5 years |
| Private foundation required annual distribution | 5% |
| Private foundation excise tax | 1.39% of net investment income |
| Estate tax rate | 40% |
Top Gotchas
- Step-up in basis at death: JTWROS, TIC, and TBE step up only the deceased's share; community property steps up BOTH halves (a double step-up), the key tax edge.
- Revocable vs irrevocable: revocable = probate avoidance only, no tax benefit; irrevocable = estate tax benefit and asset protection, but zero grantor control.
- Probate avoidance: JTWROS, TBE, CPWROS, living trusts, TOD/POD, and beneficiary-designated assets all skip probate; TIC shares and testamentary trusts do not.
- Per stirpes vs per capita: per stirpes sends a deceased beneficiary's share down to their children; per capita redistributes it among the living, and the grandchildren get nothing. Per capita is the usual default.
- Beneficiary designations override the will, so a forgotten ex-spouse on a 401(k) can still inherit.
- Appreciated securities to a DAF avoid capital gains tax AND deduct at full fair market value, the most tax-efficient gift.
One-Breath Recap
Titling drives control and inheritance: JTWROS, TBE, and community property pass to survivors and skip probate, while TIC goes to the estate through probate, and community property alone gets the double step-up in basis. Revocable trusts avoid probate but keep assets in the taxable estate; irrevocable trusts cut estate tax and shield assets but cost the grantor all control. Testamentary trusts still probate; living trusts do not. Beneficiary designations and TOD/POD accounts override the will, QDROs split employer plans penalty-free in divorce, and donor advised funds trade an irrevocable gift for an immediate deduction and later advisory grants.
Need more than the recap? This is a condensed summary. If it is not enough, read the full Ownership and Estate Planning Techniques unit for the complete lesson.