Transfer-on-death (“TOD”) directives enable an estate to avoid probate by designating assets with a will or testamentary document. Though some state laws prohibit TOD deeds for transfer of automobile registration and real estate assets, joint tenancy, bank accounts, and other cash convertible assets such as bonds and securities, qualify for payable-on-death (“POD”) distribution at when an estate originator dies. By forming a living trust, an estate owner can protect a spouse and designated beneficiaries from probate and tax complications by planning TOD and POD transfers in advance. This may include planned directives for end of calendar year tax season transfers of securities and other account assets to a nonprofit charitable giving 501(c)3. Estate owners and planned giving specialists can read on for more information about TOD and POD transfers.
A will, estate, or trust holding a brokerage account or portfolio of securitized assets is eligible for TOD registration. Review state rules guiding TOD registration of securitized assets for estate transfer in the jurisdiction where an estate trust or will is enacted. Heirs and designated beneficiaries inherit brokerage accounts and securitized assets automatically at time of a decedent’s death. Registered TOD assets are transferred from those accounts directly to beneficiaries, thus sidestepping probate proceedings that might otherwise delay the distribution of assets. Depending on the state, TOD real estate deed transfers may or may not be permitted.
Estate transfer of tax-exempt accounts like certificates of deposit, can create advance POD designation within trust or will directives. Federal and state rules of estate provide an estate’s decedent retain the rights to trust or will POD designated account until death. Transfer of POD beneficiary designated assets occurs when the estate becomes effective at that time. POD permits a beneficiary to claim a designated account asset directly from the banking institution where it is held, without undergoing probate court review.
Rules of intestate succession provide spousal survivorship entitle a living spouse the full value of a decedent spouse’s estate as “co-tenant,” “joint tenant,” or “tenants in common;” meaning the surviving owner receives the property after their loved one is gone. Federal and state laws of intestacy guiding executor and trustee administrative decision regarding joint-tenancy accounts and real property held by an estate at the end of an owner’s life, dictate automatic transfer of those assets to a spouse. The federal Internal Revenue Service (IRS) protects marital deduction and tax-exemption for estate proceeds transferred to surviving spouses. The surviving spouse also holds the legal right to designate named beneficiaries of an estate’s property assets formerly held as joint tenants.
The formation of a living trust allows for IRS tax-exempt income distribution and other designated benefits to be administered named beneficiaries of an estate prior to the owner’s death. By forming a trust and establishing a will or estate testamentary document, with named trustee(s) and designated beneficiaries for future transfer ownership of TOD, POD, and real property assets, the distribution of those assets is easier when the estate comes into full effect. In this manner, an estate owner can eliminate the risk of lengthy probate proceedings for loved ones with living trust TOD and POD transfer directives.
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Transfer-on-death (“TOD”) and Payable-on-death (“POD”) living trust directives protect an estate and its beneficiaries from probate proceedings at the time an estate becomes effective.
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