How to Avoid Issues with Assets in Transfer on Death Accounts

While a transfer on death (TOD) account can help you avoid probate, it is crucial that you know how to avoid issues with assets in a TOD account.

Transfer on death (TOD) accounts can help keep the decedent’s beneficiaries out of court because TOD accounts give the option to avoid probate and transfer the account directly to the decedent’s beneficiaries.

While a transfer on death account offers plenty of benefits, you also need to consider the downsides of setting up a TOD account. It is advisable to contact a Pearland estate planning attorney to help you set up a TOD account properly to avoid potential issues with assets.

What are TOD Accounts in Estate Plans?

An increasing number of Texans set up transfer on death accounts because it allows the account holder to have complete control over their assets during their lifetime and ensures that their assets pass to intended beneficiaries after the holder’s death without probate.

As its name implies, a transfer on death account automatically transfers the account holder’s assets held in the account to a designated beneficiary upon the holder’s death.

However, there are a number of issues you need to be aware of before setting up a transfer on death account in Texas. Discuss your particular situation with an experienced estate planning lawyer to get help creating a TOD account.

Seven Potential Issues to Avoid When Setting Up a Transfer on Death Account

If you are considering creating a transfer on death account as part of your estate plan, you need to know what potential issues to avoid to protect your assets after your passing.

1. You Need to Specify How You Want to Divide Your TOD Account

While your TOD account can be divided between several designated beneficiaries, the assets held in the account do not have to be divided equally. For this reason, you need to specify how you want your assets to be divided between your beneficiaries to avoid potential conflicts and misunderstandings.

2. Review Your TOD Account After Major Life Events

Just because you have a transfer on death account does not mean that it should be left unchanged until your death. In fact, it is critical to review your TOD account regularly, especially after major life events such as marriage, childbirth in the family, divorce, or the death of a beneficiary.

3. Update Your Beneficiaries Periodically

Even if no major life events happen, it is still a good idea to update your beneficiaries periodically to avoid any potential issues with your assets.

4. Make Sure That Your TOD Account is Consistent with Your Overall Estate Plan

When setting up a transfer on death account, it is vital to make sure that the TOD account is coordinated with the overall estate plan to avoid disputes and inconsistencies.

5. Make Sure That Your Estate Has Enough Money to Pay Taxes

If you want most of your assets to be held in a transfer on death account, make sure that your estate has a sufficient amount of money to pay taxes and cover other essential expenses after your death.

6. Be Careful About Naming Minor Children as Your Beneficiaries

In most cases, investment firms refuse to release the assets held in a transfer on death account to an underage minor without a court order specifying which adults will have the authority to handle the minor’s finances and make financial decisions on their behalf.

7. The Surviving Spouse May Change a Joint TOD Account

Many married couples choose to set up joint transfer on death accounts. However, it is essential to keep in mind that when one spouse dies, the surviving spouse will get complete control of the TOD account. This means that the surviving spouse will have the authority to change the TOD account beneficiaries.

Contact a knowledgeable estate planning attorney to make sure that you understand how to avoid all potential issues with your assets when creating a transfer on death account in Texas. Schedule a free initial consultation with our attorneys at John Powell III, P.C., to discuss your particular case. Call 832-850-6095.