25 What are the various forms of mutual fund account registration?
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This article is from the FAQ, by with numerous contributions by others.
25 What are the various forms of mutual fund account registration?
The way in which your mutual fund account is registered is an important
factor in estate planning. The disposition of property or assets after
the death of an individual is often governed by the way that
property or account is titled. Listed below are descriptions
for three common forms of mutual fund account registration.
THESE DESCRIPTIONS ARE FOR GENERAL REFERENCE ONLY.
SEEK COMPETENT LEGAL ADVICE FOR YOUR LOCALE AND CIRCUMSTANCES!
Sole Ownership:
Individual registration is the simplest form of ownership because
one person has absolute control of the property. Owner must plan for
transfer of the account when he/she dies; commonly done with a will.
Otherwise state rules of succession and state inheritance laws dictate
disposition of account upon death.
Joint Tenant:
Most common form of ownership involving 2 or more individuals. Each person
owns an individual interest in the entire account. Consequently, income
generated from the account is owned equally by all of the parties involved in
the joint tenancy. Right of survivorship dictates that upon the death of a
joint tenant, the account immediately and automatically passes to the
surviving owner(s). Joint tenants do not have to be related individuals.
Tenants In Common:
Differs from joint tenancy in several ways. Tenants in common each own a
specific portion of the account. If no specific allocation is made
(e.g. two-thirds/one-third or one-half/one-half), the account is said to be
equally divided among all of the tenants. Income earned on the account
is divided based upon the specific allocation of ownership. As in joint
tenancy, tenants in common do not have to be related individuals.
There are no survivorship rights for assets held in tenancy in common. Upon
the death of one of the tenants, the assets will pass to whomever the
decedent names in a will.
Note:
Community property is a specific form of registration that is only
available in certain states. The following states are community
property states:
Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas,
Washington and Wisconsin
According to Joseph Morlan:
"In property held jointly, the portion transferred on death (usually an
undivided half interest) is entitled to stepped up cost basis
regardless of how the title is held and regardless of community
property. The advantage of community property is that under code sec.
1014 (b)(6) the surviving spouse is ALSO entitled to a stepped-up
basis for his or her half interest if at least half of the community
property in question is includible in the decedent's gross estate for
estate tax purposes."
Get the final word on tax and estate implications regarding specific
forms of registration from a competent tax or legal professional.
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