“Transfer on death (TOD) accounts can keep your estate planning intact, while keeping your beneficiaries out of court. If you’re among the 57% of adults who don’t currently have a will or trust, your family is likely headed to probate court.”
A Transfer-on-Death (TOD) account can eliminate a legal problem, by moving your assets without leaving them in your will.
Yahoo Finance’s recent article, “Transfer on Death (TOD) Accounts for Estate Planning” explains that a transfer on death (TOD) account automatically transfers its assets to a named beneficiary when the holder dies. TOD account holders can designate multiple beneficiaries and divide assets any way they want. However, the beneficiaries have no rights to a TOD account, while its owner is alive. The beneficiaries can also be changed at any time.
When a person with a TOD account dies, the executor will deliver a copy of the death certificate to an agent at the account’s bank or brokerage. The account is re-registered in the beneficiary’s name. A TOD account sidesteps the probate process and takes precedence over a will.
If you have a surviving spouse as your joint owner, investment and bank accounts will go to them before going to a TOD account beneficiary. Based on state law, a beneficiary may receive the assets of a TOD account, only after a joint owner spouse’s death, if at all.
A TOD account can be divided among several beneficiaries, but it doesn’t have to be done so equally. A TOD account with someone under 18 as a beneficiary, could also be a problem because minors can’t control investment accounts. You would need to name a guardian or set up a trust (and name a trustee).
As you start the estate planning process, an experienced estate planning attorney will be a big help in organizing your finances and accounts. Talk to them about your overall estate plan objectives.
Reference: Yahoo Finance (June 26, 2019) “Transfer on Death (TOD) Accounts for Estate Planning”