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Probate and TOD accounts

| May 11, 2021 | Blog, Probate |

The long waits and expenses associated with probate court often motivate Florida residents to seek methods for sidestepping the whole process. A transfer-on-death account presents one of those options for brokerage accounts holding stocks, bonds, and mutual fund shares. A TOD account allows the account holder to designate one or more beneficiaries who automatically gain control of the account when the owner dies. Account holders may name trusts as beneficiaries if they desire.

Easy to use

The simplicity of a TOD account may attract you. Aside from filling out a beneficiary designation form for the brokerage, you have little else to do. Upon your passing, the beneficiary must only present your death certificate to assume full ownership of the investment account. Your beneficiary will not have to deal with the slow timeline that is typical of a probate court.

Pitfalls of TOD accounts

A formal probate process may benefit you more than designating an investment account beneficiary. The wishes that you state in your will could allow you to exert control that prevents your assets from going in directions you had not anticipated. For example, a surviving spouse from a second marriage who receives the account could redirect funds to stepchildren instead of the original account holder’s children. In another example, minor children who receive funds via TOD would first have a guardian who maintains the account before they receive complete access to the funds at age 18, which may be too young.

Estate planning often involves thinking one or two moves beyond your initial desire to bequeath assets. Concerns about creditors, restrictions on distributions to young people, and the potential to disinherit loved ones unintentionally may alter the outcome of your final wishes. For these reasons, people often seek guidance from an experienced lawyer.

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