Estate planning is an unignorable component of financial management that helps to ensure that your assets are distributed according to your wishes after your passing.
One estate planning tool that you should consider exploring is a transfer on death (TOD) designation.
What is transfer on death?
A transfer on death is a legal provision that allows you to specify beneficiaries for certain assets, such as:
- Bank accounts
- Real estate
When you pass away, these assets are directly divided among the designated beneficiaries without going through probate if they are subject to a transfer on death designation. As you know, probate facilitates the distribution of a deceased person’s estate; unfortunately, it can be time-consuming and costly. With a TOD, you can bypass this process, helping to ensure a faster and more efficient distribution of your assets.
Benefits of using a TOD
Using a transfer on death designation in your estate planning has several advantages; as mentioned earlier, a TOD helps your beneficiaries avoid the time-consuming and costly probate process for certain assets. But that’s not all; probate proceedings are public, which means anyone can access information about your assets and beneficiaries. A TOD keeps these details private.
Additionally, a TOD can ensure that assets are swiftly transferred to your beneficiaries, providing them with much-needed financial support during a difficult time. It’s also worth mentioning that you have the liberty to change or revoke TOD designations at any time during your lifetime, giving you flexibility in your estate planning.
How to set up a TOD designation
Creating a transfer on death designation is a relatively straightforward process; all you have to do is determine which qualifying assets you want to designate with TOD beneficiaries. This can include bank accounts, investments or real estate. You should also specify the individuals or entities who will receive these assets upon your passing. Confirm you have their full legal names and contact information.
The designation is made easier by the fact that most financial institutions and government agencies have specific forms for TOD designations. However, you should note that you’ll need to complete and submit these forms to establish a designation. Remember, life circumstances change, so reviewing and updating your TOD beneficiaries is essential. Marriage, divorce and the birth of children may warrant changes.
A TOD can provide a streamlined and efficient way to help ensure that your assets end up in the right hands without the complexities of probate. Enlisting legal counsel can help you use this tool wisely.