With an account set up to “transfer on death,” the assets go directly to beneficiaries upon the account owner’s passing. Creating an account this way is beneficial in avoiding the costly and time-consuming process of probate, but it’s important to make sure that the account titling fits with the rest of the estate plan in place.
Titling an account “Transfer on Death” and adding one or two beneficiaries may seem simple and straightforward. Most investment accounts make this easy to set up, and assets can then be transferred rather quickly to a beneficiary. Beneficiaries can also be changed more easily than amending a trust.
However, mistakes or omissions can be made with “transfer on death” account titling as with any beneficiary designations. Here are a few main issues to be aware of when using a Transfer on Death (TOD) account titling.