Is a TOD designation the same as naming a beneficiary

[Golden sunsets]

My DM is a widow, DF having passed away 10 years ago. I am an only child, Sole Beneficiary and Executor of DM's estate once she passes. Aside from the question in the thread title I'm also wondering if the final estate, which will consist of financial accounts only all of which name me as beneficiary, and the total of which is less than the State and Federal Estate and Inheritance tax thresholds, would likely avoid probate? (Also there is no debt or other liabilities involved.)


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[RetireBy90]

I recently lost my DM and her assets besides personal items were in 2 accounts at financial institutions. The accounts had beneficiaries identified and all $$ passed without probate. There was still some paperwork but it didn't go through the courts.



She had a lawyer she had used in the past so I called him and he filed paperwork with the court naming me as executor, but there were no assets to dispose of through probate.



I did review her beneficiary statements once a year to verify they were as expected as I had a different institution "loose" a beneficiary designation couple years ago.



There were some procedures to complete and paperwork involved but no probate for her estate.

 

[Golden sunsets]

Thank you so much. That is about what I've expected, but your suggestion to check beneficiaries is a good tip. I shall do so. And I will use an attorney, when that day comes. When DF passed, the estate had to go through probate, as the real estate had not been titled properly. I was hoping to avoid a similar situation.

 

[RetireBy90]

Mom had to move to a retirement home where she could get some assistance and we were able to sell her house about 2 years ago. That removed the last item that would have required probate. At least that was my understanding that the house would need to go through probate. I'm certainly no expert just one experience. Hope your action time is long into future.

 

[jIMOh]

My DM is a widow, DF having passed away 10 years ago. I am an only child, Sole Beneficiary and Executor of DM's estate once she passes. Aside from the question in the thread title I'm also wondering if the final estate, which will consist of financial accounts only all of which name me as beneficiary, and the total of which is less than the State and Federal Estate and Inheritance tax thresholds, would likely avoid probate? (Also there is no debt or other liabilities involved.)


Sent from my iPad using Early Retirement Forum

I would ask two questions
1) is TOD the same as naming a beneficiary
2) does an account with TOD designation bypass probate?

Make sure you are asking the question you want the answer to...

 

[Golden sunsets]

I would ask two questions
1) is TOD the same as naming a beneficiary
2) does an account with TOD designation bypass probate?

Make sure you are asking the question you want the answer to...

Yes that is my question, plainly stated in the Thread title. Is a TOD the same as being named a beneficiary?

I did just find the definition with a simple google query. The greatest difference between a will beneficiary and a transfer-on-death beneficiary is that transfer-on-death beneficiaries can reach the asset immediately when you die. Transfer-on-death accounts do not have to pass through probate. ... Your beneficiary receives whatever money remains, if any. So I guess my new question is, Is there such a thing as a TOD form as opposed to naming someone a beneficiary, that is a form available from the Bank/Broker? I have not heard of such forms, but that of course does not mean they don't exist.

 

[The Cosmic Avenger]

I would also point out that if you want to avoid probate/small estate completely, check the laws in the state where DM resides on any exemption for household goods and vehicles, if she has one. New York has generous exemptions: $15K for "household goods", which included the day-to-day checking account, and $25K for a primary vehicle, IIRC. And check with a lawyer on this part, but I counted the last month's rent, clean up/move out expenses, and funeral costs against my dad's remaining checking funds when I calculated the "estate", which technically left the estate with zero funds that could have even counted towards the exemption anyway. They even had a worksheet for that.

 

[RetireBy90]

Sounds like we are left with your question about the difference between TOD and named beneficiary on the bank and broker accounts. They may be two names applied to same status or I'm thinking it may be a state by state thing. DM lived in Nevada where she was able to setup a TOD on real property, but may not be a difference when it comes to brokerage accounts.

 

[Rianne]

For tIRA we used beneficiary forms. This allows the beneficiary to decide whether to keep the funds and let them grow or sell and pay taxes. So important to keep these forms up to date. There are details regarding RMD, somewhat complicated.

The rest in our living trust and we designated the beneficiaries. This includes charitable trust as well as family. All done with Trust Attorney advice.

 

[audreyh1]

Yes that is my question, plainly stated in the Thread title. Is a TOD the same as being named a beneficiary?

I did just find the definition with a simple google query. The greatest difference between a will beneficiary and a transfer-on-death beneficiary is that transfer-on-death beneficiaries can reach the asset immediately when you die. Transfer-on-death accounts do not have to pass through probate. ... Your beneficiary receives whatever money remains, if any. So I guess my new question is, Is there such a thing as a TOD form as opposed to naming someone a beneficiary, that is a form available from the Bank/Broker? I have not heard of such forms, but that of course does not mean they don't exist.

I helped my dad fill out the TOD form for his brokerage account, so yes, there are forms at financial institutions for TOD beneficiaries that specifically say TOD. Not all financial institutions may provide this option.

TOD bypasses the will and any probate.

In my Dad’s case only his real property will go through the will.

 

[RunningBum]

Yes, TOD forms exist. Not all banks/brokers support them. Check with her institutions. In some states, you can put a TOD on real estate as well.

And yes, you stated the question in the thread title, and then made no mention whatsoever in your post. You shouldn't be wondering or complaining that your question isn't being answered.

 

[Golden sunsets]

Yes, TOD forms exist. Not all banks/brokers support them. Check with her institutions. In some states, you can put a TOD on real estate as well.

And yes, you stated the question in the thread title, and then made no mention whatsoever in your post. You shouldn't be wondering or complaining that your question isn't being answered.

Didn't I? I did say, "Aside from my question in the thread title I'm also wondering......"

 

[Golden sunsets]

I helped my dad fill out the TOD form for his brokerage account, so yes, there are forms at financial institutions for TOD beneficiaries that specifically say TOD. Not all financial institutions may provide this option.

TOD bypasses the will and any probate.

In my Dad’s case only his real property will go through the will.

I did speak with the broker today and downloaded the form. This form would supercede the broker beneficiary form already signed by my DM and in the broker's system. But the broker also stated that regardless of which form used, activity is frozen at death(not a surprise) and assigned to a department to resolve with a representative of the estate, so it is still unclear to me if there is any real difference. I will probably complete the form anyway. I've requested a copy of the beneficiary form so that I can compare the two.

 

[gwraigty]

I did speak with the broker today and downloaded the form. This form would supercede the broker beneficiary form already signed by my DM and in the broker's system. But the broker also stated that regardless of which form used, activity is frozen at death(not a surprise) and assigned to a department to resolve with a representative of the estate, so it is still unclear to me if there is any real difference. I will probably complete the form anyway. I've requested a copy of the beneficiary form so that I can compare the two.

The simple answer is that, yes, naming a beneficiary makes the account/asset TOD or POD without having to go through probate.

Regarding the bolded part above, a representative of the estate is not needed for the beneficiary to claim the TOD/POD assets. In some cases, there is no need to open an estate because all or most of the assets have beneficiary designations. (The remainder may well fall under the threshold for a release from administration.) Even if there is something that has to go through probate, this has nothing to do with assets that have beneficiary designations.

All you have to do is notify the financial firm that the account owner is deceased, you are a named beneficiary on the account, and you'd like to be sent a claim form for the funds. (I'd think that all beneficiaries would be sent claim forms to the addresses of record, upon hearing this.) Then you fill out the claim form, include a certified copy of the death certificate, and wait. It might involve opening up rollover IRAs to receive retirement account funds, but I gave you the simple version.

I've been through this myself and know how it works.

 

[Golden sunsets]

The simple answer is that, yes, naming a beneficiary makes the account/asset TOD or POD without having to go through probate.

Regarding the bolded part above, a representative of the estate is not needed for the beneficiary to claim the TOD/POD assets. In some cases, there is no need to open an estate because all or most of the assets have beneficiary designations. (The remainder may well fall under the threshold for a release from administration.) Even if there is something that has to go through probate, this has nothing to do with assets that have beneficiary designations.

All you have to do is notify the financial firm that the account owner is deceased, you are a named beneficiary on the account, and you'd like to be sent a claim form for the funds. (I'd think that all beneficiaries would be sent claim forms to the addresses of record, upon hearing this.) Then you fill out the claim form, include a certified copy of the death certificate, and wait. It might involve opening up rollover IRAs to receive retirement account funds, but I gave you the simple version.

I've been through this myself and know how it works.

Thank you so much. Yes this will be a simple process. Two bank accounts, one brokerage account, one small IRA and one insurance policy, all designating me as beneficiary. No real estate. Very little in the way of remaining personal property as DM resides in a Memory Care facility. I'm still not clear though on whether it matters if the brokerage firm has on file a TOD form, or a beneficiary designation form. I realize this may differ by state.

 

[RetireBy90]

Thank you so much. Yes this will be a simple process. Two bank accounts, one brokerage account, one small IRA and one insurance policy, all designating me as beneficiary. No real estate. Very little in the way of remaining personal property as DM resides in a Memory Care facility. I'm still not clear though on whether it matters if the brokerage firm has on file a TOD form, or a beneficiary designation form. I realize this may differ by state.

So what brokerage has the account? My DM had one with Wells Fargo and one with Fidelity. Both were simple matter of filling out a form and providing certified death certificate. Since both have local offices, I did them in person with a visit to the local office. So, I’m suggesting if your DM accounts are with Wells or Fidelity you should be able to take a death cert to local office and fill out form there if you are on account as beneficiary.

I did a dry run couple years beforehand just to ask what process was at each brokerage. Might make you feel better if you visited the brokerage and asked them. Just in case they want something not on file with them today.

 

[gwraigty]

Thank you so much. Yes this will be a simple process. Two bank accounts, one brokerage account, one small IRA and one insurance policy, all designating me as beneficiary. No real estate. Very little in the way of remaining personal property as DM resides in a Memory Care facility. I'm still not clear though on whether it matters if the brokerage firm has on file a TOD form, or a beneficiary designation form. I realize this may differ by state.

I'm not sure why the confusion.

For example, here is a link to Charles Schwab's beneficiary form:

https://www.schwab.com/public/file/P-831898

Note that at the end of the page it says:

Such a beneficiary arrangement is also referred to as Transfer on Death (TOD) in the securities industry and Payable on Death (POD) in the banking industry. This form uses the phrase “Designated Beneficiary Plan,” but the result for your accounts is the same as it would be if the beneficiary arrangement was referred to as a TOD provision on your Schwab One Brokerage account and a POD provision on your High Yield Investor Checking account.

The results are simply that you need not get a lawyer or the probate court involved in the transfer of assets to the beneficiaries.

Here is their claim form, for a peek at how this would work:

https://www.schwab.com/public/file/P-3719049/APP10781-fill.pdf

(Note that they require something that I didn't need to provide getting my TOD funds, an Affidavit of Domicile, which shouldn't be problematic.)

The above examples should be pretty similar to the applicable forms at other financial firms.

 

[badatmath]

So I guess my new question is, Is there such a thing as a TOD form as opposed to naming someone a beneficiary, that is a form available from the Bank/Broker? I have not heard of such forms, but that of course does not mean they don't exist.

Different banks have different processes. Bank A had me come in and answer some questions in person with a personal banker - took maybe 10 minutes. Bank B faxed me a form to mail in.

Both you had to ask for it though it was not readily obvious how to do it if you did not ask the question. I kind of felt like they hid it on purpose . . .

My bank statement clearly states in the title now account of badatmath POD XXXX.


My state has transfers of vehicles so I have a form for that.

 

[gwraigty]

Different banks have different processes. Bank A had me come in and answer some questions in person with a personal banker - took maybe 10 minutes. Bank B faxed me a form to mail in.

Both you had to ask for it though it was not readily obvious how to do it if you did not ask the question. I kind of felt like they hid it on purpose . . .

My bank statement clearly states in the title now account of badatmath POD XXXX.


My state has transfers of vehicles so I have a form for that.

One of our brokerage statements has DESIGNATED BENE PLAN/TOD in the title. That is the only account that shows something in the title, although all of our other accounts do have the beneficiary designations, that we can verify by checking them online.

That's another good point. It's not always necessary to fill out a paper form. We've been able to designate beneficiaries online many times.

 

[Golden sunsets]

Just wanted to circle back here. I requested of the broker yesterday, a copy of the Beneficiary Designation on file with the brokerage and received it today. It is the same document as the Transfer on Death Agreement, so all is good.

 

[harley]

Just a word of caution. Setting TOD or naming a beneficiary is good and necessary, but make sure you check it every once in a while. I had set my beneficiaries at TD Waterhouse years ago. Just recently I took a look just for the hell of it, and the beneficiary was some random person's trust. I switched it back, then called them. They (now TDAmeritrade) admitted that they had accidentally made the change when someone transposed a couple of numbers. And they said it would have been dealt with if DW made a claim. But what if the other person's trust had kicked in first. And the reason for doing this in the first place was to avoid complications. So do it, but verify every once in a while.

 

[SecretlyFI]

Just a word of caution. Setting TOD or naming a beneficiary is good and necessary, but make sure you check it every once in a while. I had set my beneficiaries at TD Waterhouse years ago. Just recently I took a look just for the hell of it, and the beneficiary was some random person's trust. I switched it back, then called them. They (now TDAmeritrade) admitted that they had accidentally made the change when someone transposed a couple of numbers. And they said it would have been dealt with if DW made a claim. But what if the other person's trust had kicked in first. And the reason for doing this in the first place was to avoid complications. So do it, but verify every once in a while.

+1
My MIL had a brokerage account at Scottrade, which became TD Ameritrade. My DH was the beneficiary on the Scottrade account, which we had confirmed with them. A few months ago we happened to check the TD account online and there was no beneficiary noted. It had been dropped at some point, probably in the transition. Scary, but glad we checked. I think we were able to re-establish it online without calling them.

 

[Golden sunsets]

Yes; Checking periodically makes perfect sense. Thanks for the suggestion.

 

[Cobra9777]

My FIL died last year. Everything transferred seamlessly to DMIL, either via joint ownership or beneficiary/TOD/POD. When DMIL dies, everything will transfer to DW and her brother 50/50, including ownership of the house and car. There will be no assets requiring probate. Personal effects and household goods will be informally divided or sold/donated.

Our stuff is set up same way. Easy. Unless you live in a state that still doesn't allow TOD on real estate and motor vehicles. In which case you should write the appropriate state legislator. Or move.

 

[ERD50]

Mom had to move to a retirement home where she could get some assistance and we were able to sell her house about 2 years ago. That removed the last item that would have required probate. At least that was my understanding that the house would need to go through probate. I'm certainly no expert just one experience. Hope your action time is long into future.

What happened with the proceeds from the sale of the home?

Each State may have its own laws, but in IL it is the total $ amount that triggers probate, so a $200,000 house, or $200,000 in investments would both trigger probate.

Now a side comment - it appeared to me that if you didn't have over $100,000 in any one account (the IL probate limit), it would be the "honor system". IIRC, if the trustee tried to take out more than $100,000, the institution would require some probate documentation (or maybe only release it to the probate court?). But if you had a $10,000 account, I think all they might do is ask if probate is involved. I'm not suggesting anyone attempt this, but I do wonder if/how it would be enforced.

-ERD50