TOD (Transfer on Death) Handy, Helpful, but not the Holy Grail

Recently we have been receiving questions concerning TOD (Transfer on Death) account titling at a higher than usual rate. Our suspicion is opportunistic fiscal cliffer’s may be accidentally inaccurately describing this tool.  Never afraid to simplify and clarify an idea, you know us…we will take the bull by the horns, so here goes a quick review of the TOD Title.

A TOD title is used to add a beneficiary to after tax/non IRA assets that would not otherwise have such a directive. If easier you can think of adding a TOD to an investment account as a similar outcome of the beneficiary designation that your IRA has. A TOD directs ownership of the account immediately to said beneficiary upon presentation of a death certificate for the original account owner. Sounds easy and simple, but here are a few items to review before you step into such titling.

  1. There are no special tax savings by utilizing this title (Our fiscal cliff accidental communicator possibilities)
  2. Overrides your Will directives (When you title a TOD, the Will no longer controls the account)
  3. Death Certificate is necessary to process (This may take longer than probate in some scenarios)
  4. May strangle the executor from expense cash (If everything in an Estate has a directive/beneficiary, there may be no funds remaining in the Estate to pay short-term ongoing expenses)
  5. Not all (but most) states allow TOD (Be sure to check your state laws before utilizing a TOD title)

We hope this will help with the contagious confusion running somewhat rampant out there currently.  Feel free to forward this to someone who may find it of interest.

Have a great day !


8222 Douglas Ave # 590
Dallas, TX 75225

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