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IN THE SECTION

Do transfer on death accounts prevent probate?

| Jun 25, 2021 | blog, estate administration & probate |

Executing a will often makes it necessary to go into an Indiana probate court and follow all the necessary legal steps to transfer assets. Probate may come with costs and the potentially lengthy amount of time it can take to complete the process. When writing a will, the testator may worry about the stress placed on his or her heirs during the legal proceedings. Options to avoid probate exist, and taking advantage of “transfer on death” beneficiary designations is one.

The transfer on death solution

Probate involves reviewing a will and then distributing assets to those persons named in the document. Probate also requires the executor to submit payments to creditors and other steps. It may take time for a beneficiary to receive money bequeathed in probate, although things could move faster when funds sit in a transfer on death (TOD) account.

TOD accounts are financial accounts in which the primary holder could name a beneficiary. So when the account holder passes away, the named beneficiaries assume ownership.

No probate necessary

Transfer on death accounts operate outside of probate. There’s no reason for the court to rule on TOD accounts since the beneficiaries assume ownership after death. The funds may not even face requirements to cover the deceased outstanding debts.

Generally, providing the financial institution, be it a bank or brokerage house, with a death certificate and any necessary forms moves the transfer on death process along.

Beneficiaries may still have tax requirements, though. Anyone who is considering creating an estate plan should provide information to beneficiaries about any tax obligations they owe.

Also, jointly held accounts may transfer on death when rights of survivorship exist. The same may be true with real estate.

Estate planners with questions about probate or TOD accounts could speak to an attorney. A lawyer may advise clients on legal steps to avoid probate.