Transfer on Death account explained
By JEFF ROTH
A Transfer on Death account is an available option to avoid probate. The account will automatically pass to the beneficiary designated by the account owner at his or her death. This is a contract between the account owner and the institution holding the funds or assets. All rules are created within the written contract and any policy of the institution. A contract is signed that establishes who the beneficiaries are. There can be more than one beneficiary and all will be equal unless you designate percentages that equal 100 percent. A transfer on death account may be used to leave funds to a third party without the knowledge of the family or their ability to prevent your direction.
You must also identify who would be a contingent beneficiary if your primary beneficiary would predecease you. Most companies will not allow Per Stirpes as a designation. If you do not have a named backup, the funds will pass under the rules of the probate court.
This will also be available with a joint and survivor account upon the death of the survivor. This transfer on death account can be altered until the death of the second account holder. Most banking institutions will not open this kind of account under a Power of attorney but must be done by the actual account owner. This account cannot be used for an Individual Retirement Account or any other qualified account.
This is a contract with your bank so at your death, the banking institution may only distribute as dictated on the account which becomes irrevocable at death. Once you have created this account, it is incumbent on you to alter the account if you have a change of heart. I have seen accounts go to individuals who are no longer friends but the account was never corrected.
In Ohio, one of only a few states, you can title your real estate using a recorded Transfer on Death Affidavit. This can be changed and does not become effective until your death. This will transfer your real estate immediately upon death to your named beneficiary. Again, you have avoided probate and created an immediate transfer upon your death.
This same designation is available for the immediate transfer of a motor vehicle. A vehicle title will be reissued listing the name of the beneficiary upon your death right on the title. Your beneficiary need only go the title office at your death with proper identification and a new title will be issued to the named beneficiary.
With the right facts, this is an inexpensive way of making final distributions to your loved ones.
Jeff Roth is a partner with David Bacon and Jessica Moon of the firm Roth and Bacon
with offices in Port Clinton, Upper Sandusky, Marion, Ohio and Fort Myers, Fla. All
members of the firm are licensed in Ohio and Florida. Roth’s practice is limited to wealth
strategy planning and elder law in both states. Nothing in this article is intended for, nor
should be relied upon as individual legal advice. The purpose of this article is to provide
information to the public on concepts of law as they pertain to estate and business
planning. Roth can be reached at firstname.lastname@example.org or 419-732-9994.