Transfer-on-death (TOD) accounts are bank or brokerage accounts with a named beneficiary. These may also be referred to as payable-on-death accounts. They can be a simple but important part of your estate plan.
How TODs Work
If you have a designated beneficiary on your financial account, that person can go directly to the bank to claim the property when you pass away. They may be required to provide your death certificate or other documentation, but that’s all they need to do to receive the property.
While you’re alive, you remain in control of the account. The designated beneficiary won’t have access to or control over the account.
TOD accounts avoid probate. This produces several benefits:
- Your beneficiaries get your property much faster.
- You may reduce your probate fees.
- The accounts don’t become part of the public record.
TOD Accounts and Wills
You can also designate beneficiaries for retirement accounts, life insurance policies, and some other accounts. The important thing to remember is that your beneficiary designation will supersede anything your will says about these accounts.
For example, say you name Cathy as your designated beneficiary on a savings account. Your will says that the savings account will go to Kim. Cathy will receive the account upon your death, and the provision in your will referencing the savings accounts won’t take effect.
One way that TOD accounts can end up in probate is when the named beneficiary passed away before you. For this reason, you may want to name an alternate beneficiary and review your beneficiary designations often.
Other Probate Avoidance Techniques
TOD accounts offer a simple method of probate avoidance. There are many other probate avoidance techniques you may also want to consider:
- Living Trusts offer more flexibility and can be used on real estate, bank accounts, and personal property. The property will pass to the trust beneficiaries.
- Jointly owned property will pass to the joint-owner.
- Assets that are gifted while you are alive won’t be a part of your probate estate.
Contact a North Carolina estate planning attorney to discuss the use of transfer-on-death accounts and other probate avoidance strategies in your estate plan.
King Law Offices is a full-service law firm with an outstanding team of professionals who work diligently, creatively, and compassionately on behalf of our clients each day. We serve the Upstate of South Carolina and Western North Carolina. Call 888-748-KING (5464) today to set up a consultation with one of our dedicated estate planning attorneys.