What is a TOD Account?
A Transfer on Death (TOD) account is where the client filled out a TOD form where assets automatically transfer to a named beneficiary when the original owner dies. Assets do not pass through probate court. The benefit is that a TOD account can avoid a legal mess by moving your assets without passing through your will. This simplifies your estate. Fast, Free, and Private. No one will know about these assets.
How is a TOD different than a beneficiary?
Many think of beneficiaries as a result of a will. A TOD form transfers assets to a beneficiary without using the will!
What happens when an account owner dies with a TOD in place?
- > The executor of the estate will send a copy of the death certificate to an agent at the brokerage/bank.
- > The institution will re-register the account to the name of the beneficiary.
TOD Hierarchies
- A surviving spouse will inherit assets automatically, given the spousal inheritance rules. Probate is needed though; TOD will help avoid probate.
- A TOD account supersedes a will (Real Estate may be different based on State)
Common accounts to place a TOD on
- Checking and savings (sometimes called Payable on death)
- Investment accounts
- House
- Car
** Retirement accounts typically have beneficiaries already on them.
Other Notes:
While the original account owner is alive, the TOD beneficiary has no rights to the account.
A TOD beneficiary can be changed at any time, so long as the account holder is deemed mentally competent.
A TOD should be used on all non-retirement assets and do not have a beneficiary to avoid probate court. A TOD is Fast, Free, and Private! A TOD is a poor man’s Trust.
