Q: What does transfer on death mean?
A: Dear Prudent:
Transfer on death (TOD) is a method through which you can name beneficiaries on an asset so that the asset transfers to that named beneficiary automatically upon your death. When all goes well, this asset will transfer at the time of your death, without the need for court intervention.
TOD is helpful if you don’t have a trust and don’t want your assets to go into probate when you die. However, there are several pitfalls to be aware of when using a TOD to avoid the court process at the time of your death. First, if you become incapacitated before death, your family would need to go to court to apply for guardianship to get access to your assets. Second, if you and your named beneficiary were to die at the same time, your assets would go into the court process and distributed pursuant to the rules of intestacy, and may not go where you choose.
Finally, there is no possibility of protecting what you are leaving behind from your beneficiaries creditors, lawsuits or a future divorce. It just goes to them outright, and they can do whatever they choose with it. Many people prefer more protection for their hard-earned assets.
If you want to ensure your assets go to the right beneficiary, start by sitting down with a Personal Family Lawyer®. Your Personal Family Lawyer® can walk you step by step through creating an asset and estate plan that will protect your wishes.