4 Ways To Prevent Your Investment Accounts From Being Frozen After Death

Contents

Assign a Beneficiary Establish a Living Trust Keep Your Important Documents Organized Consult With an Estate Planning Attorney

While death will come with a grieving process and plenty of paperwork, you want to ensure that your accounts don’t get frozen to add to the stress for your family.

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According to 2023 research from Capitalize, 29.2 million 401(k) accounts had been forgotten about, equaling around $1.65 trillion in assets. What makes this forgotten money issue even more daunting is the realization that many of these accounts could be frozen at death for the account holder.

Furthermore, FINRA pointed out that when a brokerage account holder dies, the firm will request various documents to help proceed, including a death certificate, a court letter of appointment naming the executor, and a trustee certification (among others).

Your investment accounts can be significant assets that you want your family to benefit from upon your passing. This is why GOBankingRates spoke to experts to help you figure out what you can do to avoid having your investment accounts frozen after you die.

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Assign a Beneficiary

“One of the first things I encourage my clients to get in order is their account titling and beneficiary designations,” remarked Aaron Brask, a financial planner at Aaron Brask Capital. “I find the lowest hanging fruit are bank, brokerage and retirement accounts.”

When a married couple has a joint account, the surviving spouse can maintain control of the assets upon the passing of a partner. However, if your accounts are in your name, you want to ensure that you have designated a beneficiary so the account isn’t locked from your family.

“To ensure the accounts aren’t frozen after death, account holders should ensure they’ve designated what’s called a ‘Transfer on Death’ beneficiary, which is someone who can take over the investment account(s) if they die, and in turn benefit from the investment,” said Leslie H. Tayne, Esq., a finance and debt expert and founder of Tayne Law Group. In order to assign a TOD beneficiary, the account holder has to contact the financial institution where the investments are held. The institution should provide the account holder with the proper paperwork and follow up to ensure it’s filled out completely.

Tayne elaborated, “A benefit of assigning a TOD beneficiary is that they should be able to take over the investment accounts without probate, which can be a time-consuming and, at times, complicated process.”

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Establish a Living Trust

Brask brought up that in some cases, one’s situation or goals may be too complex for standard account titling or beneficiary designations. Tayne noted the best option here is to establish a living trust, which can include your investment accounts. Tayned added, “While the original account holder is alive, they can manage these accounts, but can also designate a successor to take over these accounts and distribute funds upon their death, if necessary.”

This is a helpful way to evade probate processes after death. Placing multiple accounts or assets in a revocable living trust can ensure smooth access for your trustee when you pass. A trust can avoid probate and minimize disruptions, unlike a will. However, it’s also important to note that creating a trust is just the first step. You’ll also want to look into retitling assets in the name of the trust or specifying the trust as a beneficiary.

Keep Your Important Documents Organized

The experts agreed that consumers with significant investments who want to ensure the accounts won’t be frozen if they die are advised to thoroughly communicate with their designated beneficiary about where important documents can be found. You’ll also want to have organized files that reference your accounts, balances and other important information.

It’s essential to be as organized as possible to ensure a smooth transition for your investments to your beneficiaries when you pass. You don’t want your family to lose time and money trying to figure out how to access your documents.

Consult With an Estate Planning Attorney

Tayne recommended consumers with hefty investment accounts consult with an estate planning attorney to learn more about their options for specific investments. Brask pointed out that you’ll want to consider the tax consequences of titling and beneficiary designations. You’ll want to work with a fiduciary financial advisor who understands the tax and estate aspects of your financial situation. You could also help your survivors reduce taxes through the use of strategic titling, beneficiary designations or trusts.

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