Transfer on Death Designations in Estate Planning

A Transfer on Death (TOD) or Pay on Death (POD) account allows named beneficiaries on the account to receive assets at the death of the owner of the account without the need for probate. These accounts can transfer a variety of types of bank accounts. Additionally, if your goal is to transfer real property, this is accomplished through a transfer on death deed.

Probate is the process by which the validity of a will is established and assets are distributed through a court action, with or without the supervision of the court. A TOD scenario will allow named beneficiaries to receive the assets at the death of the property owner without going through the probate process. The transfer to the beneficiaries therefore occurs automatically once the property owner dies. Additionally, the beneficiary in a TOD may be an individual or an organization.

As with anything in estate planning, there are pros and cons to having a TOD account or recording a TOD deed. One of the obvious benefits is that an immediate transfer takes place, usually after submitting some necessary paperwork, which can include a death certificate and the like. Additionally, having a TOD account or recording a TOD deed can be easy to implement with the help of an experienced attorney.

There are, however, other considerations to make when determining whether a TOD is right for you. For example, in an asset with limited assets there could be difficulty in covering expenses that naturally come with death, such as a funeral, final tax payments, etc. The asset(s) transferred via a TOD could have been used to cover those expenses. Another potential drawback that needs to be accounted for is if a beneficiary were to die before the owner of the estate. Without proper planning, the assets in the TOD are automatically transferred to the estate.

Overall, the most important aspect of a well-executed TOD is its simplicity. While a trust may bring about a similar result in avoiding probate, it comes with additional expense and complexity. If you find yourself interested in a TOD, or if you have any other estate planning questions or concerns, we have an experienced team of Indiana estate planning attorneys here at McNeely Law ready to assist you.

This McNeelyLaw LLP publication should not be construed as legal advice or legal opinion of any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own lawyer on any specific legal questions you may have concerning your situation.