What is "TOD" Estate Planning?

Transfer on Death planning has a place in estate planning.

An important part of estate planning is the transfer and distribution of assets.

The two most well-known tools for this are last wills and trusts.

A last will directs distribution through probate proceedings.

A trust bypasses probate, if properly funded.

According to a recent Yahoo! Finance titled “Transfer on Death (TOD) Accounts for Estate Planning,” you can bypass probate for some assets through transfer on death (TOD) arrangements.

How does it work?

When you have a TOD account, the assets held within it pass directly to the beneficiary named on the account when the owner dies.

Essentially this works the same as a beneficiary designation.

It takes priority over whatever is stated in a last will.

If you leave everything in your last will to your spouse but name your child the TOD beneficiary to an account, your spouse will inherit all except the TOD account.

Many accounts and assets can be arranged to transfer on death, but it is wise to check the laws of your state.

For example, both Kansas and Missouri provide for real estate to pass by beneficiary deed without probate. 

Not so for our neighbors in Iowa.

What happens if you only own part of the asset?

Only the part you own will be transferred at your death.

Can you name multiple beneficiaries?

Yes, you can.

The assets will not belong to beneficiaries while you are alive.

That is a big plus from an asset protection standpoint.

In this way, they function similar to a last will.

This means you can change beneficiaries at any time while you have mental competency to do so.

TOD accounts are popular tools for their simplicity.

Often the account only requires the agent at the bank or brokerage account to receive the death certificate for the account to be re-registered.

Having a TOD account does not mean you can neglect the creation of a last will.

You will want a last will to make the probate process move effectively and efficiently.

A last will also fills functions in critical areas where a TOD cannot.

These include the nomination of a guardian for minor children, in addition who inherits your velvet painting of Elvis and other tangible personal property treasures.

Work with an experienced estate planning attorney to get your affairs in order and learn whether TOD accounts would work with your estate planning goals and the laws of your state.

Reference: Yahoo! Finance (June 26, 2019) “Transfer on Death (TOD) Accounts for Estate Planning”