Transfer on Death (TOD) is a way that you can take title to an asset. Its how some people register a bank account, investment account or a physical asset. And it tells the world what you want to happen to that property once you move on to that Big Bank up in the sky.
When you use the TOD registration you’ll name a beneficiary or beneficiaries at the time you set up the account. Then, when you die, the asset goes to those people you named. There are no lawyers, no courts and no probate involved. Doesn’t get much simpler than that Pilgrim.
Why Use TOD?
If you don’t have a trust and you don’t want to use joint tenancy, the TOD might be a nifty way to go. It’s usually much better than just keeping assets in your name alone. If you keep assets in your name alone nobody knows who you want to inherit that property. As such, those assets may have to be probated which takes a long time and is very costly.
Keep in mind that when you use Transfer on Death registration, it doesn’t matter even if you do have a trust or a will. The beneficiaries you named on the TOD paperwork get the asset when you die regardless of what your estate plan says.
Can You Own Anything You Want Using Transfer On Death Registration?
Theoretically you can. But state laws govern the TOD registration. While most states adopted the “Uniform TOD Security Registration Act” some states made changes to the rules. But even so, not every custodian offers the TOD option.
Other Important Considerations
Besides the fact that the TOD supersedes any other estate plan you have, it’s important to remember that this only solves the problem of what happens to the asset should you die. It doesn’t help at all if you become disabled and need assistance managing your assets.
To address that issue, consider looking into a Durable Power of Attorney. This is a legal document that picks up where the TOD stops. But talk to an attorney first please.
Bottom Line
Before taking title to any asset, you should always consult with qualified legal counsel. If you have a trust, the TOD registration is probably not going to be something your attorney will suggest you use – but she still might. Never-the-less, the Transfer on Death is a strong consideration if you are single and don’t have or need a trust or if you decide the trust or joint tenants is not the best option.
Remember, the beneficiaries you name on the TOD document get the asset regardless of what your will or trust says. So if you want to bypass your estate planning documents for a particular account, the TOD might be your answer.
Do you have TOD accounts? Why or why not?
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