ACCOUNT OWNERSHIP – ACCOUNT TITLING 

When you open an account with a bank, credit union, stockbrokerage firm, mutual fund company etc., they will ask you to decide how your account will be “titled.”  Most people typically check the box without giving any consideration to their actions simply to get the account open.  Since this decision has an impact on the disposition of the funds, greater care should be given to how the account is titled. 

Individual Account – If you open the account in your name only, you have sole control over the account.  When you die, the assets become part of your estate and will be distributed according to your will, or if you die without a will, according to the state laws of intestacy.

Pay-on-death (POD) account, or Transfer-on-Death (TOD) account- The POD designation is used for banking type accounts, checking, savings, certificates of deposit, etc.  The TOD designation is used for stock market accounts, stocks, bonds, mutual funds, etc.  These accounts work like an individual account, except that you get to designate the person or persons to receive the assets in the account upon your death.  A POD or TOD designation results in what is called a “non-probate transfer,” which means that the transfer occurs before your will or the laws of intestacy kick in to determine how your property will be distributed.  POD and TOD accounts are a good way to have your assets directly transferred to those you desire to receive them with a minimum of complications and legal risks.  Not all states allow these accounts to be used because the state governments want all of the probate fees they can get.  You need to check with your financial institution to see if the designation is allowed in your state.  The POD or TOD titling does not restrict the account owner in any way from transacting activities in the accounts.

A problem can occur if you name one beneficiary as the POD or TOD recipient and you want to have the asset split between two or more recipients.  The POD or TOD recipient gets sole possession of the asset and needs to cooperate in distributing the asset to the other desired beneficiaries, which often creates a problem between the beneficiary in possession of the entire asset and those desiring their share.  Remember the old adage, possession is nine-tenths of the law.

Joint Tenancy Account – In a joint tenancy account, you own the assets in the account with someone else while you are both still alive. At the death of the first joint tenant to die, the ownership of all of the assets in the account transfers to the surviving joint tenant.  This is a non-probate transfer, so the ownership interest of the first to die never makes it into that person’s estate.  You can also designate POD or TOD beneficiaries on a joint account, just as with a POD or TOD account.

While both joint tenants are living, each of the owners has authority to transact unlimited business in the account, including taking out all of the assets, stopping payment on checks issued by the other owner, etc.  Although each owner does have complete authority over the account, the ownership of the assets in the account is based upon the individual contribution to the account by each owner, which may create significant legal problems.  The entire balance in the account is subject to any levy, lien, etc., processed against any of the joint tenants. This can pose a problem, such as when an account is titled in joint tenancy with the account owner's child and the child becomes subject to a levy for some reason such as an auto accident.  It is then possible that all of the funds in the account can be attached to satisfy that levy, even though they are not the child's funds, so be careful..

Tenants in Common Account – A tenancy in common account works like a joint tenancy account except there is no transfer by survivorship.  When an account holder of a tenancy in common account dies, that person’s interest in the account becomes a part of his/her estate and is transferred in accordance with the will.  While each owner is alive, each owner has authority to transact unlimited business in the account without the other owner knowing about it or agreeing to it.