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Can you arrange for accounts to transfer to others when you die?

On Behalf of | Jan 27, 2023 | Estate Planning

The more property that has to pass through probate court, the longer estate administration can take after you die. Many testators creating their estate plans focus primarily on limiting what assets pass through probate court. Some people move property into trusts, while others make arrangements to give gifts to their family members before they die.

Arranging for property to directly transfer the time of your death could be another solution. Some people execute deeds ahead of time to allow their home to transfer ownership outside of probate court. It is also common practice for those with financial assets, like investment accounts, to attach a transfer on death designation.

Are such transfer arrangements beneficial when planning your estate?

Keeping assets out of probate court leads to faster transfers

For many testators, keeping as much of their property out of probate court as possible is important. It helps protect that property from creditor claims and limits the risk of estate taxes. Avoiding probate court also means a beneficiary receives certain assets

The accounts that transfer to someone else after you die it will typically not pass through probate court either. Especially if you worry that a specific account could lead to estate challenges because of its overall value, it may be a smart move to make arrangements for the account to transfer directly to a specific beneficiary after your death.

What happens with a transfer on death designation?

Adding special instructions to your account to have it transferred to someone else when you die is only the first step in the process. The beneficiary will still have to assert their rights for the transfer to take place.

Typically, that means they will need to go to the financial institution in person and present the death certificate. At that point, the institution can then arrange for the account to transfer to the new owner as per the instructions of the now-deceased prior owner.

Obviously, there are some challenges and risks in such systems, not the least of which is the possibility that the beneficiary could die at the same time you do. Testators can protect themselves from the failure of an account to transfer by naming the secondary beneficiary and keeping their designations up to date as their family circumstances change.

Looking into every viable option for the descent of property in your estate plan can help you more effectively preserve wealth for the next generation.

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