Estate Planning Advantages of Transfer on Death Registration
These days there is no shortage of reasons to avoid probate. In addition to the cost of attorneys' fees, you can expect probate of an estate to take longer than ever as state and local governments are forced to operate on reduced budgets. The assets you leave behind for your spouse, children, and other heirs may already be less than you hoped, especially if a portion of your estate consists of stock.Using a transfer on death or TOD registration is a simple step you can take to transfer stocks and other securities to your beneficiaries without the hassles of probate. Another advantage of this type of account is your TOD beneficiaries do not have any rights to the account during your lifetime. You maintain full control and ownership of the account and can change beneficiaries at any time. See non-probate transfers.
TOD Accounts and Your Will or Living Trust
If you name a transfer on death beneficiary on any account, review your will, living trust, and other estate planning documents to ensure these documents are consistent with your TOD beneficiary designations. For example, you want to avoid a situation in which you name your daughter, Lisa, sole beneficiary of your stock brokerage account, but your will bequeaths all stock I own at my death to my son, David.While assets in a TOD account will generally pass to the named beneficiaries irrespective of conflicting bequests of the same property in a will or trust, leaving this type of discrepancy for your executor and heirs to sort out should be avoided. In addition to the legal fees your estate may incur, conflicting bequests can lead to bitterness and resentment within your family. If you need to update your last will and testament, have an attorney revise your estate planning documents. See codicils and amendments.
Avoid Probate of Retirement Accounts
By properly naming beneficiaries on your retirement accounts, you can ensure that funds in your IRA, 401k, 403b, and similar types of accounts are not subject to probate. For information on how to designate beneficiaries on these accounts, see IRAs and your estate plan and 401ks and your estate plan.
What is a Transfer on Death Registration?
A transfer on death registration or TOD is a type of account registration that may be established for non-retirement accounts, such as brokerage accounts that hold stocks, bonds, ETFs, and mutual funds. A transfer on death registration allows account owners to designate primary and contingent beneficiaries to inherit assets in the account without probate.TOD registration may be used on an individual account or a joint account with right of survivorship such as a
joint tenants account. For example, if you have a joint account with your spouse for stocks and bonds, you can use a transfer on death registration to pass these assets to your adult children without probate. Upon the death of the last surviving spouse, the joint account holdings will pass to the TOD beneficiaries.While transfer on death beneficiaries may be named on non-retirement accounts in a majority of states, a few states, including Louisiana, do not recognize this type of account registration. If your brokerage firm or broker is unable to assist you in setting up beneficiary designations on your investment accounts, consult an estate planning attorney about other options for avoiding probate, such as a living trust. See finding an attorney.
How to Set Up a TOD Account
Setting up a transfer on death account is typically very easy. It should take just a few minutes and the only cost involved may be less than a dollar in postage. Take the following steps to establish a TOD account:1. Visit your brokerage firm's website and search for their Transfer on Death Beneficiary Designation Form. Select the form for a non-retirement or non-IRA account. Download and print a copy of the form. If you cannot locate the form, call your broker or the firm's customer service department to request it. Explain that you want to designate beneficiaries on your brokerage account or securities.2. Fill in the beneficiary designation form completely. Read the terms and conditions of the firm's agreement regarding TOD accounts. The form should explain your rights, as well as conditions that may apply to your beneficiaries. Indicate the percentage amount each primary and contingent beneficiary should inherit. The percentages for primary beneficiaries should total 100 percent and the percentages for contingent beneficiaries should total 100 percent. Sign and date the form. If there is a joint account owner, have the joint owner sign and date the form as well.3. Mail the completed beneficiary designation form to the firm mailing address shown on the form.Note: Some financial institutions may require you to open a new account or complete a new account registration form to establish a transfer on death registration. If so, have a financial advisor walk you through the process of completing this paperwork. If you are required to open a new account, you will also need to ensure your securities and other funds are transferred from the old account to the new TOD account. See also
Pay on Death Accounts.
In some states, an owner of real estate can make and record a Transfer-on-Death Deed to pass real property to a designated beneficiary upon the owner's death without probate. To learn more about the use of this type of estate planning deed, see
transfer on death deed.
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