Many financial institutions offer the account holder a choice of establishing a bank account as an “In Trust For” account and an investment account as a “Transfer on Death” account. For example, my bank account statement may say “Daniel Timins I.T.F. Barack Obama” or my investment account may be titled “Daniel Timins T.O.D. Herman Munster.”
My personal choice of beneficiaries aside, while seeing these words on a statement may be a bit unnerving, there are huge post-mortem benefits to having ITF and TOD accounts:
- The accounts are solely under my control during my life (the beneficiary doesn’t even get statements during my life)
- They are revocable
- Upon my passing my beneficiary merely needs to show up at the bank with my death certificate to claim the funds
- No attorney work is typically required
In summation, the transfer of my funds at my death is inexpensive and almost instantaneous.
A will passes on a deceased person’s property when we don’t know who gets the property upon their death. If my bank account is not owned jointly or is not an ITF account then the account passes through probate because, in the absence of the will, it is not clear where else the funds should go at my death. Probating a will requires the following steps:
- Your named executor signs a petition and oath
- Additional court paperwork may be required
- Your original will and a death certificate must be procured
- Your will must also be valid
- Your nearest family members MUST either sign waivers or show up at a court date if they wish to contest the will
- Your choice of beneficiaries must be put on notice
- A court filing fee must be paid
- Attorneys must be paid (unless someone tries to do it on their own, which I do not recommend)
- The court must issue letters authorizing your executor to collect assets
- WARNING: Your executor is now responsible for ALL of your outstanding affairs
- Your bank and investment accounts are collected by the executor
- Your assets are initially placed in an estate account
- Creditors are paid
- Your executor files an inventory with the court
- Your beneficiaries sign releases
- Your money is released to your beneficiaries
This is the best case scenario, and all of the steps are required. The process is expensive, time consuming, and often frustrating.
If you trust your beneficiaries to make wise decisions, make sure to establish your financial accounts as ITF and TOD accounts.
If you do not trust your beneficiaries, read my blog next week…
Q FOR U: Have you set up your financial accounts to pass outside of your will upon your passing?