It’s possible to name a TOD beneficiary for many account types—retirement accounts, savings accounts, and brokerage accounts. This designation can help you and your heirs avoid the sometimes costly probate process. You can name anyone. However, if you’re married, your spouse may have special rights over your assets that take precedence over your named TOD beneficiaries.
Investopedia’s recent article entitled “Who Can Be a Transfer on Death (TOD) Beneficiary?” explains that the rules are pretty broad regarding naming beneficiaries. A TOD beneficiary can be a person, charity, business, or trust. Let’s consider who you can name as a beneficiary and why you would.
Naming a transfer on death (TOD) beneficiary for your accounts can simplify the inheritance process for your heirs and family. That’s because your designated beneficiary will automatically get the assets in the account. Therefore, it bypasses probate.
The Uniform Transfer on Death Securities Registration Act lets owners designate beneficiaries for their stocks, bonds, or brokerage accounts.
You can also open a payable-on-death bank account to distribute cash assets after you pass away without putting them through probate.
A TOD can transfer even real estate in some states.
A single person can name anyone as a beneficiary. However, a married person’s spouse may have rights to some or all of a retirement account upon death. A surviving spouse may also have more options for withdrawing money than other beneficiaries. It depends on the rules that apply to each account. Check with an experienced Estate Planning Attorney.
You can also typically name as many TOD beneficiaries as you like. You can use these to specify the percentage of assets each designated beneficiary should get.
Note that with TOD registration, the named beneficiaries have no access to or control over a person’s assets when the person’s alive, so you retain total control over your assets until you pass away.
Reference: Investopedia (May 19, 2022) “Who Can Be a Transfer on Death (TOD) Beneficiary?”
