Dallas Attorneys for Estate Plans Involving Investment Assets

Most of us will acquire stocks, bonds, or trusts throughout our life in the hope that they’ll gain value over time. With the right estate plan, you can designate these investments to support your family members even after you’ve passed away.

The Dallas estate planning attorneys of Staubus, Blankenship, Legere and Walker PLLC have over a century of shared experience in estate and trust law and litigation. We aim to help clients in the Dallas/Fort Worth Metroplex state their wishes clearly, minimize their tax liability, support their personal representatives, and offer guidance to their survivors when legal issues arise. With a Martindale Hubbell AV Preeminent rating, we’re a firm that other lawyers trust. To get your questions answered, call us at (214) 833-0100 today.

Transfer on Death Provisions

Transfer on death, or TOD, is a designation you can make on certain investment assets. Brokerage accounts, stocks, and bonds are eligible, while retirement-related assets like IRAs and 401(k)s are not. Any investments with a TOD designation will not have to go through probate proceedings before reaching your beneficiaries.

To get a TOD designation for an investment, you must file a registration form with the issuer or brokerage. This form, however, is only the first step of the process. Before your beneficiaries can receive the assets, they must work with a “transfer agent” to verify the death certificate and change the name on the certificates or accounts.

Note that while you can add a TOD designation to a brokerage account you hold with your spouse, it will only take effect if both of you pass away at the same time. Otherwise, the account will always transfer to the surviving spouse and will not have to go through probate.

Transferring Investments in a Will

Wills are a simple and commonly-used way to transfer investments in an estate. For each asset, you can name a single beneficiary or more than one, with each person inheriting a percentage you define. You can also place investments in a testamentary trust to protect young beneficiaries.

While using a will can afford you a great degree of flexibility, you may want to consider other options if you value privacy. If you do not have an active transfer on death registration for your investment assets and list them in a will instead, they will have to go through probate proceedings. Once those proceedings conclude, they will become part of the public record.

Transferring Investments in a Trust

Trusts have much of the same flexibility as a will, but they are private and do not go to probate. You can be the trustee while you are still alive, establishing specific criteria for when your beneficiaries receive your assets, such as age or beginning college. Depending on the type of trust you pick, you could also downsize your estate for tax purposes.

To put investments in a trust, there are specific steps you’ll need to take depending on the type. Some examples include:

• Stocks – You must get permission from the issuer through their transfer agent. Sometimes, a guarantee from your brokerage or bank may be required.
• S. Savings Bonds – You must fill out Form 1851 to reissue a savings bond to your trust. Submitting this form means you won’t have to report gains from the bonds on your federal tax returns, as the trust will own the bonds.
• Brokerage accounts – Different firms have different procedures for transferring accounts to trusts. You’ll likely need a “certification of trust” or other document to prove that you have power over the trust and the securities. Speak with your broker for more information on the forms you need to file.
• Real estate holdings – You’ll need to contact a county registrar to create a new deed in the name of the trust.

Some investment assets cannot go into a trust, such as:

• Retirement accounts, 401(k)s, and annuities
• Health savings accounts
• Life insurance policies
• UTMA/UGMA accounts

Even if an investment can’t be transferred to a trust, you may still be able to put a transfer on death provision in place for it. A living trust attorney can guide you on how to best protect each asset in your portfolio.

Will My Beneficiaries Owe Taxes?

Many clients wonder what their survivors’ tax liability will be upon inheriting an investment. The answer is “they might owe taxes,” depending on what each beneficiary does with their investments once everything has been transferred into their name.

Texas has no state income, inheritance, or capital gains tax. However, if a beneficiary sells an investment they’ve inherited, they may still be liable to pay federal capital gains taxes.

If someone inherits an investment and sells it less than a year later, they’ll be liable for short-term capital gains taxes, which have the same rate schedule as normal income taxes. Long-term capital gains tax rates vary based on a person’s total taxable income and the type of asset they sold.

What Happens to My Investments Without an Estate Plan?

If you don’t have a will, trust, or TOD provisions for your investments, they will automatically go into “intestacy” proceedings. The court will locate eligible beneficiaries according to the Texas Probate Code, in this order:

• Surviving spouse/children by that spouse
• Surviving spouse/children by another person
• Surviving spouse, with no children or parents
• Surviving spouse and parent, but no children
• Surviving spouse and siblings, but no parents or children
• Surviving children, but no spouse

The court must follow the specific provisions of the law to distribute the decedent’s assets, appointing a personal representative to carry out its orders. If no eligible beneficiaries can be found from the decedent’s immediate or extended family, then the State of Texas becomes the sole beneficiary.

There is no guarantee that a court will honor your wishes if you pass away without an estate plan. To best protect your investment assets, be proactive in creating an estate plan and update it regularly.

Contact Staubus, Blankenship, Legere and Walker PLLC Today for an Estate Plan Consultation

When you work with an experienced and skilled estate planning lawyer, you have the best odds of protecting your stocks, brokerage accounts, bonds, and other investments for your heirs. The DFW estate litigation team at Staubus, Blankenship, Legere and Walker PLLC offers consultations to help you understand your legal options. We can work on your behalf to write wills, set up trusts, retitle investments, and fight for the best possible outcome for your beneficiaries. Contact our office today at (214) 833-0100 to speak with one of our attorneys.