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Opting for TOD accounts

On Behalf of | Oct 11, 2022 | blog, estate administration & probate |

Transfer on death (TOD) accounts allow Indiana estate planners a means of transferring financial assets to beneficiaries outside of probate. Those considering designating beneficiaries may wish to review this approach’s potential upsides and downsides.

TOD accounts explained

A transfer on death account refers to a financial account that allows the primary owner to list one or more beneficiaries. Checking, savings and brokerage accounts are among those that typically allow for transfer on death designations. When the primary account holder passes away, the account’s ownership transfers to a named beneficiary.

Probating transfer on death accounts is not necessary. The beneficiary usually provides a death certificate and might need to fill out any required forms. Form requirements may vary among financial institutions. Regardless, avoiding probate could be an upside for beneficiaries who don’t wish to wait for the probate process to end to receive their funds.

They may be reliant on the executor’s swiftness in delivering death certificates, though. If the beneficiaries cannot provide death certificates, they will have difficulty transferring ownership of a TOD account. An incompetent executor might undermine the process’s expediency.

TOD concerns

The co-owner will become the sole owner when the account is held jointly. The beneficiaries would not receive anything in this scenario. Furthermore, the new owner has the authority to change any named beneficiaries. Those concerned about their preferred beneficiaries receiving something during the estate administration & probate may need to leave those beneficiaries their assets in a will.

Also, naming minors as beneficiaries in a TOD account could complicate things. The underage beneficiaries might rely on supervised guardianship or conservatorship until they turn 18. Age 18 might be too young to manage funds left to them through a TOD account. Establishing a trust might work instead.