Most Florida residents have heard about using estate planning as a way to avoid probate. The probate process can take a long time and incur fees and tax consequences that chip away at an estate. One way to get assets straight to your beneficiaries and skip probate is to use a transfer on death, or TOD, designation.
What is a transfer on death account?
Registering a TOD with a financial account allows your beneficiary to receive the contents of the account immediately upon your death. The asset will be passed directly to the person you name without going through the probate process.
When will the beneficiary have control over the account?
During your lifetime, you will retain full control over the financial account that you registered a TOD with. The beneficiary you name for an account has no access to the account as long as you are alive. After your death, your estate executor will be able to distribute the asset directly to the beneficiary named on the TOD.
What types of assets can be transferred?
While you work on your estate plans, there are several types of financial accounts that you can set up a TOD for. Your retirement accounts, 401(k)s and brokerage accounts can all have a TOD. You can also create a payable on death order, which is similar to a TOD, for your checking and savings accounts.
Other details to keep in mind
There are other details that may be important for you to keep in mind, such as the rights of surviving spouses to retirement accounts. If you have a large portfolio, you’ll want to take many things into consideration when developing a strategy for avoiding probate.