Estate plans can include transfer-on-death accounts

On Behalf of | Jul 25, 2019 | estate planning

If a person in Ohio dies intestate, that is, with no estate plan, their estate will go through the probate process. Even if a person has a will, in general the will still needs to be probated. Probate can be costly both in time and money, so it is something many people want to avoid. Certain assets need not go through the probate process, though. One type of these assets are transfer-on-death (TOD) accounts.

A TOD account is one in which the account assets are automatically transferred to the account beneficiary once the accountholder passes away. For example, a person can name a beneficiary to a savings account. Once the accountholder dies, that savings account, and all funds in it, will transfer to the beneficiary. While state laws on TOD accounts vary, in general other TOD accounts may include bank accounts, investment accounts or deeds. If a TOD asset is owned by more than one person, each person can only transfer their share of the account to a beneficiary.

Beneficiaries to a TOD account have no access to the assets in the account while the accountholder is still living. In addition, the accountholder can change the beneficiary during his or her lifetime, if they are mentally competent to do so. TOD accounts also have precedence over a will.

As this shows, a TOD account with a named beneficiary may be one way for a person to pass their assets on to their heirs while avoiding probate. While TOD accounts can be an important part of estate planning, a well-rounded estate plan will include other documents, such as a will, trust, living will, medical power of attorney and health care power of attorney. Those who want to make sure their estate will not be probated will want to work with an estate planning professional to ensure their estate plan meets this goal.