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Common Estate Planning Tools: Transfer on Death Accounts

Trusts and Joint Ownership are options for dealing with the disposal of bank account assets outside of a probate administration. Another method involves naming a successor on the account itself, a Transfer on death provision which can be known as a Totten Trust or a Payable on Death POD designation. As always, this is but one tool in your box of estate planning.

Transfer on Death Accounts

A bank account held in joint tenancy can be equally accessed by all part-owners. This may be problematic if you’re trying to save up money in the account to give to your heirs. Holding a separate account and designating it a transfer on death account allows you full control over those assets up until they are distributed after your death.

What is a Transfer on Death (TOD) account?

A TOD account is exactly what it sounds like. Upon the account holder’s death, the assets will be distributed to whomever the decedent has determined. There may be more than one enumerated beneficiary to a TOD account and the assets are distributed on a percentage basis as defined by the account holder.

It is important to note that beneficiaries will often need to claim their share of the account by notifying the bank with which the account is held that the decedent has passed. This notice requires evidence, such as a death certificate. Once the beneficiaries have all let the bank know, then distributions may begin without the holdup of a probate administration. How do I create a Transfer on Death account?

Many financial institutions will offer a TOD designation for an account by application. Contact your banking company for any specific processes to set up a TOD designation. Often, the process is a simple application that includes naming your beneficiaries and their percentages.

Why do I care?

Attorney’s fees: the distribution of TOD assets is initiated when the bank is notified of the death of the account holder. While you may want to have an attorney communicate on your behalf, it is not necessary to get the distribution process started. The same process in probate would require significant time and attorney fees.

Administration without (much) delay: although personal representatives of an estate may gain access to a decedent’s property quickly in a formal probate proceeding, the appointment of a personal representative may take a considerable amount of time (especially if the appointment of a personal representative is contested). TOD accounts distribute on the bank’s timeline and not the court’s.

Control: unlike in a joint tenancy or a trust, a TOD account, at its core, is a normal bank account. They can have joint owners, like in a joint tenancy, but this is not a requirement. As such, the account holder maintains full control over the account and may save or spend as much of the assets as they wish. Additionally, there is no additional trustee or fiduciary to worry about. All the power is in your hands.

Transfer on Death accounts are just one tool in an arsenal of estate planning tools, and, again, these tools should be considered in tandem. The Kendrick Law Group is here to help you consider all of your options; feel free to contact us for a complimentary consultation today.

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