book flipped open on table

Last year we wrote about the popular investing app, Robinhood, and I think they must have heard us loud and clear when we said that they need to get on the ball and allow clients to name beneficiaries.

Okay, maybe we can’t take ALL the credit for this update, but the fact of the matter is that Robinhood recently announced that it will allow users to name a Transfer on Death (TOD) beneficiary. This is good news when it comes to estate planning, as it allows for more control over who can inherit a brokerage asset held by Robinhood when the account owner dies. Beneficiaries can then decide to hold onto their inherited stock, liquidate, or transfer it to another brokerage.

With most financial accounts, naming a beneficiary allows that asset to transfer directly to their ownership immediately upon the account owner’s death. The fact that Robinhood has updated its platform to allow this simple ability is tremendous news, not only because the assets in that account will remain accessible and usable upon the account owner’s death, but also because of the potential to avoid probate. Note that the operative word here is “potential.”

While enabling account holders to name a designated beneficiary is a small step in the right direction, Robinhood has failed to cover all the bases that we frequently use in estate planning practice.

For example, Robinhood still does not allow users to name a Trust as the account beneficiary. It also limits distribution amounts, so if you wanted to name multiple beneficiaries, you have to distribute assets equally. This can raise a series of issues for many people; what happens if your estate plan purposefully divides assets differently among three people, but you now have to equally distribute your assets to all three? In addition, crypto assets are also not currently included in the beneficiary process, so any crypto assets would be distributed as part of your estate

Yes, Robinhood still has some work to do in expanding the capabilities of the app to better fit into a comprehensive, well-thought-out estate plan.

That being said, using an investing app like Robinhood isn’t usually the best step for your estate plan. Make sure you work with a professional advisor to ensure you have properly planned for all of your different accounts, and all of the various scenarios that could unfold in the future.

If you use Robinhood or any other investing apps, contact us to help navigate how to include these assets in your estate plan. Call (480) 855-8383 or complete the brief contact form below to get the conversation started!

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