When working through your Estate Plan, there are many options. Should you use a Will or Trust? Who are your beneficiaries? Should your assets be established as Transfer on Death or POD? Working with an experienced Florida Estate Planning Attorney will help ease the confusion and establish a customized Estate Plan.
What Is A Transfer On Death?
A Transfer on Death is an instrument or deed that is used mainly with stocks, bonds, a brokerage company and retirement accounts such as a 401(k) and an IRA. Transfer On Death (TOD) deeds are named beneficiaries that receive assets after the death of the property owner without the need for probate. Your portfolio is automatically transferred to the person named on your TOD when you pass away. The brokerage firm does not pay out the assets; they move the stocks or bonds into an account in the new person’s name. If the beneficiary does not have an account, the brokerage firm will open one. The probate court is not involved, saving the beneficiary time and money.
What Happens If Your TOD and Will Are In Conflict?
Let’s say your Will instructs all assets (including land and stocks) to be left to person A, but your TOD names person B.
- A Transfer on Death supersedes a Will or Trust. Regardless of who the will or trust names as a beneficiary, the TOD will transfer all stocks and bonds to person B.
- But a surviving spouse supersedes a TOD. According to Florida laws, regardless of who you name as the beneficiary in the TOD, financial investments will be given to your surviving spouse.
Difference Between a Transfer on Death and a Payable on Death
The main difference between a TOD and POD is the assets in which each is used.
- A Transfer on Death is generally established for stocks, bonds, brokerage accounts and retirement accounts.
- A Payable on Death is generally established for bank and money market accounts and Certificate of Deposits (CDs).
Why a Transfer On Death is Important
In Florida, a Transfer on Death is important on retirement accounts because favorable benefits are extended to the ‘natural person’ who owns the account. With a normal Will or Trust, the beneficiaries are not the original owners; the given money can be assessed large tax bills and the money can come attached to creditors. Meaning the creditors can take their portion of the money you want to leave to your loved ones. But when your 401(k) or IRA is established with a TOD, tax breaks and other benefits are transferred to the beneficiary who becomes the ‘natural person’ who owns the assets.
Developing an Estate Plan that allows for some assets to transfer outside of the probate court is an effective way to streamline the process.
Who Has Control of the Transfer On Death?
Assets are distributed to the beneficiaries only upon the owner’s death. While still alive, only the owner has access and control to a TOD account. Beneficiaries do not have control or even access to the account while the owner is living.
The beneficiaries cannot make changes or withdrawals from the TOD account until they pass away and the brokerage firm moves the assets into their account. So don’t worry; you still have complete control over your portfolio until you pass away.
Transfer oO Death Does NOT Apply to Property
The state of Florida does not recognize TOD on real estate. This means that you cannot write a Transfer of Death for any property owned.
And if you want to leave real estate to the person you are living with, it is best to have the property in both person’s names since it will not automatically be left to them once you pass. In Florida, survivorship does not apply to couples living together but not married.
Do You Have a South Florida Estate Planning Attorney
Meeting with an experienced Attorney will ensure that you have an Estate Plan specific to you and your needs based on the most efficient way to distribute your assets after your death.
We Are Your South Florida Estate Planning Attorney
At Siegel Law Group, we understand that protecting your loved ones after you pass is of the utmost importance, and we are here to help with your Estate Planning Attorney needs. Call us today for a free consultation at (561) 955-8515, or contact us through our website for more information.