CEA CEA Beneficiary Designations & Account Titling 1 — Questions and Answers
Question 1: Which type of account titling allows property to pass directly to a surviving co-owner without going through probate?
- Tenancy in common
- Joint tenancy with right of survivorship (Correct answer)
- Community property
- Sole ownership
Correct answer: Joint tenancy with right of survivorship
Joint tenancy with right of survivorship transfers the deceased owner's share directly to the surviving joint tenant, bypassing the probate process.
Question 2: A beneficiary designation on a life insurance policy generally supersedes which document?
- The insured's will (Correct answer)
- The policy's incontestability clause
- The state intestacy statute
- The insurance company's bylaws
Correct answer: The insured's will
Beneficiary designations on life insurance policies are contractual and override instructions in the policyholder's will.
Question 3: What is a 'per stirpes' beneficiary designation?
- Assets split equally among all living beneficiaries
- A deceased beneficiary's share passes to their descendants (Correct answer)
- Assets revert to the estate if a beneficiary predeceases
- Equal shares only to named individuals
Correct answer: A deceased beneficiary's share passes to their descendants
Per stirpes means a deceased beneficiary's share is inherited by their lineal descendants rather than being redistributed among surviving named beneficiaries.
Question 4: Which account titling method is only available to legally married couples in community property states?
- Joint tenancy with right of survivorship
- Tenancy by the entirety (Correct answer)
- Transfer on death
- Tenancy in common
Correct answer: Tenancy by the entirety
Tenancy by the entirety is a form of ownership reserved exclusively for legally married couples and provides survivorship rights plus creditor protection.
Question 5: A POD (Payable on Death) designation on a bank account allows the account to:
- Be managed by a trustee during the owner's lifetime
- Transfer automatically to the named beneficiary upon the owner's death (Correct answer)
- Avoid federal estate taxes entirely
- Pass through probate to heirs
Correct answer: Transfer automatically to the named beneficiary upon the owner's death
A POD designation directs the bank to pay the account balance directly to the named beneficiary upon the account owner's death, bypassing probate.
Question 6: Failing to update beneficiary designations after a divorce can result in:
- Automatic revocation of the former spouse's interest in all states
- The former spouse receiving assets contrary to the account owner's current wishes (Correct answer)
- Immediate invalidation of the account
- The state receiving the assets by default
Correct answer: The former spouse receiving assets contrary to the account owner's current wishes
While some states revoke beneficiary designations on divorce, federal law (ERISA) governs most retirement accounts and may still honor the former spouse's designation.
CEA CEA Beneficiary Designations & Account Titling 1
Which type of account titling allows property to pass directly to a surviving co-owner without going through probate?