About Transfer on Death (TOD) Accounts

If you’re worried about avoiding probate, transfer on death (TOD) accounts are a relatively new option for clients. Learn more about the features.

Presented by: Kris Maksimovich, AIF®, CRPC®, CPFA®, CRC®

A relatively new option for clients, transfer on death (TOD) accounts offer a unique beneficiary feature. Unlike similar non-retirement accounts, TOD accounts allow investors’ assets to transfer directly to their designated beneficiaries when they pass away, circumventing the probate court process. The TOD registration, which is available for both individual and joint accounts, not only streamlines the account disbursement process, it also lets account holders rest assured that their beneficiaries will receive the intended amount of assets.

TOD Features

Streamlined administration. With a traditional brokerage account, the owner’s assets go to the estate upon his or her death, and distribution is delayed until the probate process has been completed. By contrast, funds held in TOD accounts are considered nonprobate assets and pass straight to the designated beneficiaries. Once a TOD account has been established, neither a court appointment nor the terms of a will can override the Supplemental Transfer on Death Registration and Beneficiary Designation Form, which designates the account’s beneficiaries. If necessary, agents holding powers of attorney can manage the TOD accounts, but they cannot establish a new TOD account or update the beneficiary designation of an existing one.

TOD accounts have no contribution limits and can hold all types of investments. When the owner dies, all trading in the account must cease until the TOD account assets can be transferred to the beneficiaries’ accounts. The beneficiaries may then sell the positions, if desired. In order for a beneficiary to receive assets from a TOD account, he or she must have a brokerage account open at Commonwealth.

Tip: Before opening a TOD account, consider the location of your beneficiaries. For example, if a beneficiary lives out of the country, Commonwealth will need to plan accordingly.

Unlimited number of beneficiaries. TOD account holders can designate an unlimited number of beneficiaries, each of whom will be considered a primary beneficiary. Contingent beneficiaries may be added as well. The TOD account owner can choose, among other entities, his or her estate, individuals (including minors), trusts, and churches as beneficiaries.

You retain control. As the account owner, you continue to manage the account assets as you wish. Your beneficiaries have no rights to the account while you are living. If necessary, you can revise your beneficiary designations.

Keep in Mind

TOD accounts are not for everyone. It’s important to consider how establishing this type of account will affect your overall estate plan and the provisions of your revocable trust or will.

This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.

Kris Maksimovich is a financial advisor located at Global Wealth Advisors 4400 State Hwy 121, Ste. 200, Lewisville, TX 75056. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network^®, Member FINRA/SIPC, a Registered Investment Adviser. Financial planning services offered through Global Wealth Advisors are separate and unrelated to Commonwealth. He can be reached at (972) 930-1238 or at info@gwadvisors.net.