New York Estate Planning & Elder Law Blog
Transfer on death accounts pass on assets to an appointed beneficiary when the account holder passes away. When you establish a “transfer on death” account, assets pass directly to beneficiaries at the time of the account owner’s death. While assignments of this kind can help to avoid probate, account titling should be coordinated with the account owner’s death, especially when larger accounts and estates are involved.
While simply titling an account, “transfer on death”, and adding a beneficiary might seem like a good idea, this is not always the case. Transfer on death accounts can easily be set up on investment accounts. The primary benefit to these accounts is that they can easily be transferred to a beneficiary. Another advantage is that beneficiaries can be revised more easily than amending a trust. It’s important to understand, however, that titling an account “transfer on death” does not resolve all of your estate planning needs. Various mistakes can occur with any type of beneficiary designation. As a result, this article reviews some important details to consider if you plan on using a transfer on death account.
# 1 – Life Changes Must Be Addressed
Life events can impact how accounts should be titled. Things like divorce, death, and marriage should make you review all of your estate planning accounts to determine exactly how they are written. You should make sure you know who will inherit your retirement accounts as well.
# 2 – Ignoring Your Estate Plan
Transfer on death accounts must be coordinated with your estate plan. This becomes more important the larger your net worth grows. Failing to keep beneficiary plans updated can cause substantial discomfort among you and your beneficiaries and in some cases can even lead to legal battles. You should also avoid problems that occur when a primary amount of your assets are held in a transfer on death account. In these situations, an estate might not have enough money left to pay taxes or support your loved ones. Less flexibility exists with an estate plan when a transfer on death account exists when compared with a living trust.
# 3 – Appointing a Minor as a Beneficiary
Investment firms do not release the assets of an account to minors without court orders describing which adult has the legal authority to make a financial decision on behalf of another. The transfer on death assignment does not permit instruction on how assets can be used. A person also cannot restrict the receipt from a transfer on death account to a certain age like it’s possible to do with a trust. Married couples are permitted to establish joint transfer-on-death accounts. When one spouse passes away, the other spouse will receive control of the account under the right of survivorship.
Obtain the Assistance of an Experienced Estate Planning Lawyer
The estate planning process is full of challenges, but a knowledgeable attorney can help guide you through this process. Contact Ettinger Law Firm today to schedule a free case evaluation.