How to Handle Assets in Transfer on Death Accounts

How to Handle Assets in Transfer on Death Accounts

Transfer on death accounts seem like an easy way to create an estate plan and avoid probate, but it is a bit more complex than that.

Transfer on death accounts allow assets in any account, usually those used for investments or bank accounts, to be transferred to another person upon the death of the account holder. Transfer on death accounts do help people avoid the probate process, but it is a little more complicated than that. Though it may seem as though simply calling an account “transfer on death” will take care of the task, that is not always the case. Below are a few tips on how to handle assets in transfer on death accounts.

Consider Life Changes

A marriage, divorce, or the death of a beneficiary will change your life, but your transfer on death account does not know that. Any time you experience a major life change, it is important to review your transfer on death accounts. While state law provides protection here, you may not want your former spouse to receive the funds in an account, or you may have to change distributions to account for additional family members after a birth.

Consider How the TOD Affects the Rest of Your Estate Plan

TOD accounts are a great addition to an estate plan, but it is important to remember that the two work together. Keep your beneficiaries updated about your TOD accounts and the rest of your estate plan, or disputes could lead to litigation. Also regularly review the accounts to ensure the distributions are what you had envisioned. For example, you may set up a TOD for each of your two children. Over time, the accounts perform differently and end up having significantly different balances. You may have to make adjustments to ensure the equal distributions you had intended.

Considerations for Minors or a Spouse

TOD accounts do not have limitations on them as other estate planning tools, such as trusts, do. For example, if you wish to name a minor child as a beneficiary on a TOD account, you cannot impose certain age limits. If you name your child on a TOD account, that child will receive those sum upon your death if that child is 18. You cannot restrict the account to only be available when the child turns a certain age in the same way you can with a trust, which can be problematic. Also, most investment firms are reluctant to release funds to a minor without a court order naming an adult that can receive it on the child’s behalf.

You may also want to leave a TOD for your spouse to inherit. After you pass away, control of the account will pass to your spouse. This can create problems when the spouse has a blended family or marries again later in life.

Considerations for Seniors

Many people rely on TOD accounts to provide for them in their later years as they age and cannot earn an income. It is not uncommon for seniors to name a power of attorney that can help them make decisions and keep track of their finances, but TOD accounts do not contain a power of attorney.

Our Estate Planning Lawyers in Lake Jackson, Brazoria County Can Help with TOD Accounts

TOD accounts are a great tool, but they need management, just like any other part of your estate plan. At Cordoba Law Firm, our Brazoria County estate planning lawyers in Lake Jackson can help you review your estate plan, ensure it meets your needs, and that your final wishes are fulfilled. Call us today at 979.297.2854 or contact us online to schedule a consultation.