Transfer on Death accounts can make passing on certain accounts simpler.
You have a job.
Chances are you have a bank account.
If you are married, perhaps you have a joint account.
If yes, your spouse will retain ownership when you die.
What happens after your spouse dies?
If you are single, what will happen when you die?
According to a recent Kiplinger article titled “How Transfer-on-Death Accounts Can Fit Into Your Estate Planning,” a transfer on death (TOD), also known as a pay on death (POD) account may be a viable option.
It could let you pass the account in a simple, convenient way without probate.
Is a TOD beneficiary limited to a bank account?
It depends on the state.
Some states, like Kansas and Missouri, allow for a TOD beneficiary to receive investment account, a home, or a car.
Actually, except for non-titled "tangible personal property" (think dishes, jewelry, antiques, lawn mowers, etc.), you can transfer nearly everything by this non-probate transfer method.
How does a TOD account work when you die?
Just like the beneficiary designations on your retirement funds, annuities, and life insurance, the beneficiary normally needs only to provide your certificate of death and a photo id to the custodian of the account.
The asset can then be transferred directly to your beneficiary.
Does this protect the asset from tax liability or creditors?
Not necessarily so.
The asset is still part of your estate and could be subject to income, inheritance, or estate taxes.
Because the asset is a part of the estate, financial institutions are often cautions.
They have certain responsibilities to the estate or probate claims on the account funds.
The institution may have the beneficiary take on the liability and responsibility to the estate before releasing the funds.
Do you already have a TOD account?
Be sure to review and update the beneficiaries regularly.
If you own a joint account, discuss your wishes together to make sure you do not unintentionally disinherit an heir or two.
A TOD account is part of your estate.
Work with an experienced estate planning attorney to ensure your decisions align with your goals and overall estate planning strategy.
Reference: Kiplinger (March 18, 2019) “How Transfer-on-Death Accounts Can Fit Into Your Estate Planning”