Ownership and Estate Planning

The whole unit on one sheet: ownership forms, Pay on Death (POD) / Transfer on Death (TOD), beneficiary rules, trusts, wills, divorce splits, and charitable vehicles.

Which One-Liners Win Points?

• Beneficiary designations override the will for that account (Individual Retirement Account (IRA), 401(k), life insurance, POD/TOD). For an ERISA-governed employer plan, a divorced ex-spouse can still inherit if the beneficiary was never updated, since federal law generally doesn't auto-revoke that designation.
• A will only controls the probate estate; assets with designations or survivorship transfer outside it.

Which Ownership Transfer Methods Avoid Probate?

• JTWROS: two or more owners, equal undivided shares; survivor takes all by operation of law, bypasses probate. NOT limited to married couples. Selling the whole property needs all owners, but any one owner can transfer their own share alone (severing the joint tenancy for that share).
• Tenants in common (TIC): shares can be unequal (e.g., 60/40); no survivorship, so a deceased owner's share goes through their estate and probate. Each owner can sell independently.

When Do You Use a Payable on Death or Transfer on Death Account?

• POD = bank accounts (checking, savings, certificates of deposit, money market); TOD = brokerage / securities accounts. Often confused, so lock the split.
• Owner keeps full control while alive; the beneficiary has no rights until death and can be changed anytime without the beneficiary's consent.

What Does a Beneficiary Designation Override?

• Primary beneficiary is first in line; the contingent (secondary) receives only if the primary predeceases or disclaims. Name both.
• No surviving beneficiary means the contract/plan/statute controls; that's often (but not always) the estate, going through probate.
• Per stirpes ("by branch"): a deceased beneficiary's share passes down to their descendants (keeps it in the family branch).
• Forms are held by the custodian or plan administrator, not the attorney who drafted the will; updating the will alone does not change the beneficiary.

How Do Trusts and Wills Compare?

• Will: goes through probate, becomes public record, can be contested; an executor (personal representative) carries it out. No valid will means intestate succession under state law.
• Trust roles: grantor (settlor) creates and funds it, trustee manages, beneficiary receives.
• Charitable remainder trust (CRT): income to a noncharitable beneficiary for life or a term, remainder to a qualified charity.
• Charitable lead trust (CLT): the mirror image, income to charity first, remainder to family.

How Does a Qualified Domestic Relations Order Split a Plan?

• Needed because the Employee Retirement Income Security Act (ERISA) normally bars assigning plan benefits.
• Distributions are exempt from the 10% early withdrawal penalty even if the alternate payee is under age 59 1/2.
• A spouse or former spouse alternate payee pays the income tax and can roll over the distribution into their own IRA to defer it; if the payee is a child or dependent, the plan participant reports the tax instead.

What Are the Two Benefits of a Donor Advised Fund?

• Managed by a sponsoring organization; the donor makes an irrevocable contribution and gets an immediate income tax deduction in the year of the gift.
• The sponsoring organization has legal control; the donor only recommends grants over time.
• Donating eligible long-term appreciated securities avoids capital gains tax on the appreciation AND deducts the full fair market value (FMV): a double benefit. Short-term holdings or other ordinary-income property generally get a smaller, basis-limited deduction instead.
• Deduction limits: up to 60% of adjusted gross income (AGI) for cash, up to 30% of AGI for eligible long-term appreciated securities; more favorable than a private foundation. Starting in 2026, a new floor also applies: itemized charitable gifts are deductible only above 0.5% of AGI.
• No minimum annual payout (a private foundation must distribute roughly 5% of non-charitable-use assets each year); grants generally go to IRS-qualified 501(c)(3) public charities.

Which Gotchas Trip Students Up?

• JTWROS is not marriage-only; the marriage-only survivorship form is tenancy by the entirety.

What Is the Memory Aid for the Ownership Acronyms?

• JTWROS = "Right Of Survivorship" (survivor gets all, avoids probate)
• TIC = "In Common" (your share goes to your estate, requires probate)
• TBE = "By the Entirety" (married only, both must agree, creditor-protected)

One-Breath Recap

Joint tenancy, Payable on Death and Transfer on Death accounts, and beneficiary designations bypass probate but stay in the taxable estate, and those designations override the will for that account; a stale ex-spouse beneficiary may still inherit, since many states auto-revoke on divorce but ERISA plans generally do not. Tenancy by the entirety shields from creditors; community property gets a double step-up. A revocable living trust avoids probate but does not cut estate tax, while an irrevocable trust generally removes assets from the estate and may shield them from creditors, both depending on the grantor giving up prohibited powers; a testamentary trust hits probate. A Qualified Domestic Relations Order splits employer plans penalty-free for a spouse alternate payee, and a Donor Advised Fund trades an irrevocable gift for a deduction while appreciated securities dodge capital gains.

Need more than the recap? Read the full Ownership and Estate Planning unit.