What is Transfer on Death Regarding Estate Planning?

October 30, 2019

Though it can be tough to talk about, death is a reality that no one can avoid. However, what can be avoided is probate court for some assets. This is the reason many people talk to their estate planning attorneys about the possibility of taking advantage of designating certain assets as transfer on death (TOD). The concept behind TOD allows an individual to name one or more beneficiaries who will receive complete control and ownership of an asset when the individual dies. This transference of assets happens without the need to go through lengthy or involved probate proceedings.

An example of TOD would be a widowed father with a savings account. The savings account has a sum of money in it. With the help of his lawyer, the father designates his two children to receive an equal amount of the savings when he dies. That way, they can almost immediately have access to their share of the account without paying taxes.

Limitations of TOD

While TOD may be a convenient way for someone to move all their assets after death without a will or trust, TOD has limitations; not all assets can be labeled as TOD. For instance, bank accounts can typically receive a TOD designation. On the other hand, real estate property cannot. Another potential issue with TOD designated assets is the potential for them to overshadow the desires of a will.

Since a TOD supersedes what is written in the will, the TOD will take precedence. This means that if a mother states in her will that she wanted one-third of her assets to go to each of her children, but she had an investment account with a TOD that goes to her sister-in-law that she forgot about, her children will receive nothing from the investment account. TOD designations can still be tapped if a person dies with a high amount of debt. If someone owes creditors upon death, the creditors may be able to take a portion of a TOD account before the beneficiary receives what is left.

TOD and Proper Planning

The goal of any TOD is to work together with other estate planning vehicles. To make this happen seamlessly, individuals and couples often work with estate planning attorneys. The lawyers help them ensure that their TOD designations dovetail with other estate planning documents. They can also suggest other ways for their clients to help their beneficiaries skip probate when legally possible.

By making certain any TOD designations will work as expected, clients and their lawyers will need to map out exactly how to make the most of the clients’ assets to be passed down. As years pass, individuals who have named TOD beneficiaries and assets should revisit their desires, as situations sometimes change radically and necessitate new estate planning papers.

Chester County Wills and Estates Lawyers at Eckell Sparks Counsel Clients on Estate Planning Matters

Though discussing what happens after you are gone can be difficult, it can also create a huge relief and peace of mind for you and your loved ones. Talk with a Chester County wills and estates lawyer at Eckell, Sparks, Levy, Auerbach, Monte, Sloane, Matthews & Auslander, P.C. for estate planning advice. Call us at 610-565-3701 or complete an online form for a free consultation. Located in Media and West Chester, Pennsylvania, we serve clients throughout Montgomery County, Chester County, and Delaware County.