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How Do Transfer on Death Accounts Work?

Butler Law May 24, 2021

Estate planning often involves making things less costly and complicated for beneficiaries. When drawing up a will, the testator may realize that surviving family members may find probate confusing and time-consuming. To help beneficiaries, a testator may set up “transfer on death” designations to avoid South Carolina probate proceedings.

How Transfer on Death (TOD) Works

Financial assets and accounts, such as stocks, bonds, money markets, and the like, often allow someone to designate a beneficiary. So, when the primary account holder passes away, the assets transfer to the beneficiary without the need to go through probate. Usually, submitting a death certificate to the brokerage house, along with any necessary forms, allows the transfer to complete.

Be mindful that joint accounts would typically pass to the other account holder and not to the beneficiaries. The surviving joint owner could change the beneficiary designations if he or she wishes.

Real estate with a deed that states “joint tenants with rights of survivorship” would transfer to the surviving owner. If both owners pass away, then the property would need to go through probate to transfer ownership.

Not Entirely Avoiding Probate

Not every asset may transfer on death. Rare works of art and jewelry, for example, are tangible property that would need to go through probate. Ultimately, transfer on death options don’t extend beyond certain property and financial accounts.

Probate also involves paying estate debts, handling tax obligations, and other duties. Probate may be unavoidable, but TOD accounts never enter into the probate process. So, TOD options may be worth exploring when taking part in estate planning.

An attorney could assist someone wishing to reduce the number of assets that go through probate. The attorney could also discuss tax issues, trusts, power of attorney, and other topics related to estate planning.