Transfer On Death
What Does Transfer On Death Mean?
Transfer on Death (TOD) is a legal agreement that allows an account owner to designate beneficiaries who will inherit certain assets in the account upon the owner’s death, bypassing probate. To gain control of the account, the named beneficiaries must present an original death certificate of the account holder. Once this is done, the beneficiaries can access the assets immediately, as the transfer does not require probate. For those who have the means, TOD can be an effective way to provide survivors with funds to cover funeral expenses and other costs, functioning similarly to the death benefit of a life insurance policy, but without premiums or restrictions.
Insuranceopedia Explains Transfer On Death
Transfer on Death (TOD) accounts can have multiple account holders. When one of the account holders passes away, the remaining assets in the joint account are transferred to the surviving account holder, not the beneficiaries. The beneficiaries will only gain control of the account after the death of the last account holder. Regardless of what is stated in the account owners’ will or trust, the assets will be distributed according to the owner’s beneficiary designation form, either equally or based on the specified proportions.
If one of the beneficiaries dies before the account owners, the remaining assets will be distributed proportionally among the surviving beneficiaries after the death of the account owner. If the sole beneficiary dies before the account owner, the remaining assets will become part of the account owner’s probate assets. These assets will then be subject to probate court proceedings for distribution to the rightful heirs. Additionally, if no TOD beneficiary is named, the account assets will also be subject to probate.
