Reference Library

Topics include education, estate, insurance, investment, retirement and risk management planning as well as basic tips for budgeting.

Investment Planning

Overview

Account Types - We support a full range of account types to help meet your needs and circumstances. Depending on the type of account you open, there are varying features, benefits, distribution restrictions, etc. associated with the account. Please discuss with your FP on which account type may be most suitable for you.

Below are examples that may be relevant when analyzing your options, but are not reflective of all available options. Other considerations also might apply to your specific circumstances. Please consult with your legal or tax advisor for more information concerning your individual situation.

  1. Individual and Joint Accounts
    1. Individual account. An individual account is an account with only one owner. At death, assets transfer to one or more heirs or designated beneficiaries as per their last will and testament.
    2. Individual/Joint Transfer on Death (TOD). An individual or JTWROS account where the owner(s) has/have designated (a) beneficiary(ies) in an TOD agreement that has been filed with the custodian of the account. If registered as an individual account, the assets in the account transfer to the named beneficiary(ies) in the TOD agreement. If registered as a joint account, the assets first transfer to the joint account holder and upon the death of the remaining account holder, to the TOD beneficiary(ies).
    3. Joint Tenants with Right of Survivorship (JTWROS). A JTWROS account has two or more account owners, with each person having an undivided interest in the entire account. Each party has equal rights to the account assets and the right of “survivorship.” When one joint owner dies, all the assets in the account will transfer to the other co-owner(s) without probate.
    4. Joint Tenants by the Entirety. A Tenants by the Entireties account is owned by two married people. The following states allow this account type: AK, AR, DE, FL, DC, HI, KY, MD, MA, MI, MS, MO, NJ, OK, PA, RI, TN, VT, VA, and WY. Upon the death of one joint owner, the other retains the right to the whole account. The creditors of one spouse cannot attach the property or force its sale to recover debts unless both spouses consent.
    5. Joint Tenants in Common. A Tenants in Common account has two or more account owners with each person owning a specified percentage of the entire property. When one joint owner dies, their percentage of the assets in the account will transfer to their estate per their last will and testament. The surviving joint owner keeps access to his/her portion of the assets, but does not have a legal right of survivorship to the deceased joint owner’s portion of the account.
    6. Community Property. A Community Property account is owned by two married people who acquired property during the marriage (with exceptions) where each spouse has equal interest in the property acquired during the marriage. Nine states allow Community Property accounts: AZ, CA, ID, LA, NM, NV, TX, WA, and WI. Puerto Rican citizens are also allowed to open this account type.
    7. Trust account. A trust is a fiduciary arrangement that allows a third party, or trustee, to hold assets on behalf of (a) beneficiary(ies). Trusts can be arranged in many ways and can specify exactly how and when the assets pass to the beneficiary(ies). Named Trustees are required to administer the Trust account according to the specifications of the Trust document.
  2. Education Savings Accounts
    1. 529 Plans. A 529 Plan is a program established and maintained by a state, or an agency or instrumentality of a state, that allows a contributor either to prepay a beneficiary's qualified education expenses at an eligible educational institution or to contribute to an account for paying those expenses. Qualified education expenses include tuition expenses in connection with a designated beneficiary's enrollment or attendance at a higher education institution, elementary or secondary public, private, or religious school. Earnings accumulate tax free while in the account and distributions aren't taxable when used to pay for qualified education expenses.
    2. Coverdell Education Savings Account. A Coverdell education savings account (Coverdell ESA) is a custodial account set up solely for paying qualified education expenses for the designated beneficiary of the account. This benefit applies not only to qualified higher education expenses, but also to qualified elementary and secondary education expenses. In general, the designated beneficiary of a Coverdell ESA can receive tax-free distributions to pay qualified education expenses. The distributions are tax-free to the extent the amount of the distributions doesn't exceed the beneficiary's qualified education expenses.
    3. The Uniform Gift to Minors Act (UGMA) and the Uniform Transfer to Minors Act (UTMA). Through UGMA/UTMA custodial accounts, a minor can own cash or securities that are controlled by a custodian until the minor meets the age of majority in the state where the account was established. All deposits into these accounts are irrevocable gifts to the minor recipient. Custodial accounts are not tax-deferred. Taxation of earnings will be based on the minor's tax rate.
  3. Individual Retirement Accounts
    1. Traditional IRA. Contributions you make from earned income to a traditional IRA may be fully or partially deductible, depending on your circumstances. Generally, amounts in your traditional IRA (including earnings and gains) are not taxed until distributed. Taxable distributions from an IRA can be taken without penalty starting at age 59½ and must be started by April 1st of the year following the year the account owner reaches age 72, unless the account owner turned age 70½ prior to January 1, 2020. If this is the case, the account owner must begin taking distributions starting April 1st of the year following the age the account owner reaches age 70½.
    2. Roth IRA. Contributions to a Roth IRA are always made as after-tax contributions; therefore, the earnings can be distributed tax-free for a Qualified Distribution. Contribution amounts for a Roth IRA are the same as those for a traditional IRA; however, there are income restrictions associated with contributing to a Roth IRA. To take a tax-free Qualified Distribution, the account owner must both have a qualifying event (age 59 1/2, death, disability, or first time homebuyer) and the account must have been open at least five years. There is no requirement to take withdrawals by a certain age.
  4. 403(b)(7) / 457 Employer-Sponsored Retirement Plans
    1. 403(b)(7). A 403(b)(7) plan is a retirement plan offered by public schools and certain 501(c)(3) tax-exempt organizations. Employees save for retirement by contributing to individual accounts. Employers can also contribute to employees' accounts.
    2. 457. A 457 plan is a deferred compensation plan available for certain state and local governments and non-governmental entities that are tax exempt. They can be either eligible plans under IRC 457(b) or ineligible plans under IRC 457(f). Plans allow employees of sponsoring organizations to defer income taxation on retirement savings into future years.
  5. Small Employer-Sponsored Retirement Plans
    1. Simplified Employee Pension (SEP) IRA. A SEP-IRA plan provides a self-employed individual or small business owner with a simplified method to contribute toward their employees’ retirement as well as their own retirement savings. Contributions are made to an Individual Retirement Account (IRA) set up for each plan participant (a SEP-IRA). A SEP-IRA account is a traditional IRA and follows the same investment, distribution, and rollover rules as traditional IRAs.
    2. Savings Incentive Match PLan for Employee (SIMPLE) IRA. A SIMPLE IRA plan (s) allows employees and employers of small businesses (businesses with 100 or fewer employees and self-employed individuals) to contribute via salary deferral and employer contributions to an IRA account. A SIMPLE IRA plan does have specific requirements, including that the employer does not maintain another retirement plan, and that the employer election to match employer contributions must be done on an annual basis and cannot be changed until the next year.
    3. Individual (Solo) 401(k). The Individual (Solo) 401(k) plan is a traditional 401(k) plan covering a business owner with no employees, or that person and his or her spouse. These plans have the same rules and requirements as other 401(k) plans.
  6. Public Site pages
    1. Handbook Account Type Comparison Education Plans
    2. Handbook Account Type Comparison Retirement Plans