How Does Stock Ownership and Mutual Funds Affect Your Estate Planning Strategy?

Nearly every estate planning and trust question that I receive from my clients will always include the discussion of bank accounts, retirement accounts, 401(k)s, IRAs, annuities, mutual funds, and stock ownership. Specifically, many of my clients have questions on what they should do with their mutual funds and stocks. Well, as I tell many of my clients, the answer to this question depends on what you want to accomplish for your surviving family?

In basic terms, stock ownership and mutual funds can be jointly owned by both spouses. Therefore, if your stocks and mutual funds are jointly owned by you and your spouse, the surviving spouse will continue to have ownership after the first spouse passes away. In addition, under most circumstances, stock ownership and mutual funds allow you to name a beneficiary upon your death. Therefore, in some instances, mutual fund and stock ownership have no impact on your estate planning strategy from a probate avoidance standpoint.

However, as I said above, this all depends upon what you want to accomplish for your surviving family. There is an endless list of reasons on why you would want to put an estate plan in place for your family. For instance, perhaps you have concerns of your adult children receiving their inheritance all at once due to their financial irresponsibility, creditors, lawsuits, or potential divorce. Well, if you simply name a beneficiary on these accounts this will not accomplish your goals. If this is your goal for your family, then establishing a revocable living trust and a beneficiary controlled trust for each of your adult children would better accomplish your goals.

This type of estate planning strategy would simply include a revocable living trust that funds into a beneficiary controlled trust for each of the adult children. With this type of strategy, each child would have control of their own trust with their share of the trust assets in trust. So long as these assets remain in trust, then the trust assets would be provided creditor and divorce protection. However, in order for this type of trust planning to work correctly, your mutual funds and stocks will need to be retitled into the trust. You would simply not be allowed to designate beneficiaries on who shall receive these funds at death.

However, this is just one strategy where it may be more appropriate to retitle these assets into the name of the family revocable living trust and not to simply designate beneficiaries. Some other strategies may include (1) capital gains tax planning, (2) asset protection during the owner’s lifetime, (3) planning for the passage of assets over multiple generations, or (4) Medicaid planning. As I said above, there are number of different estate planning strategies that I discuss with my clients each and every day.

If you have questions about estate planning in Tennessee or how you can set up your legal affairs so that your assets are protected and you provide a smooth transition to your loved ones, then I encourage you to attend one of our live free educational events scheduled this month. At these events you will hear a lot of real life stories about families that paid thousands of dollars in unnecessary expenses, families that were able to avoid unnecessary expenses, and families that enjoyed zero government intrusion into their families’ private lives.

I look forward to speaking with you at one of our upcoming live educational events!

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