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.
“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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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.”
