Transfer On Death
In a nutshell, Transfer on Death is a legal document that allows you to pass the cash or securities you own directly to another person or even an entity such as a LLC or Trust upon your death without having to go through probate. In other words, it protects your heirs' assets from outstanding debts you might have accrued in your lifetime, in the event of your death. What's nice about Transfer on Death is that it is something that's extremely simple. A bank can provide you the forms, and within five minutes you can fill out the forms and return them."
More and more banks and firms are making the Transfer on Death process much more accessible by offering e-forms on their websites so that clients do not have to go in to meet face to face or print and fax paperwork. In most circumstances, a Transfer on Death is only applicable to non-married persons. If you are married this isn't going to be quite as significant as if you are single. This is because your assets automatically transfer to your spouse upon death. However, in the event that both you and your spouse were to pass at the same time, then a Transfer on Death would apply.
It goes without saying that no matter how long you have been married, the odds of both you and your spouse passing at the same time are very slim. There are a lot of single people with a decent sized lump of cash in the bank, and maybe $50,000 in credit card or school debt. Without a Transfer on Death, their assets would go through probate and be reassigned to cover their debts. However, after this piece of paper has been filled out and signed, their assets would instead go directly to the beneficiary or beneficiaries named in the Transfer on Death document. This would even come into play in situations of home equity. For example, you owe 350k on a first home equity loan and 250k on a second. Your house is worth 500k, and you have 70k in the bank. Through normal probate process, the trust of the estate would liquidate the house and the deficient home equity balance would be covered before any of the surpluses of your bank account would be transferred to your heirs. In other words, in this specific example, your heirs would end up with nothing. You can decide for yourself the ethics of choosing between paying off the bank or providing funds to your heirs.The actual transfer process happens after death, at which point the beneficiaries must take steps to re-register the securities in their names. This typically involves sending a copy of the death certificate and an application for re-registration to the transfer agent.
More and more banks and firms are making the Transfer on Death process much more accessible by offering e-forms on their websites so that clients do not have to go in to meet face to face or print and fax paperwork. In most circumstances, a Transfer on Death is only applicable to non-married persons. If you are married this isn't going to be quite as significant as if you are single. This is because your assets automatically transfer to your spouse upon death. However, in the event that both you and your spouse were to pass at the same time, then a Transfer on Death would apply.
It goes without saying that no matter how long you have been married, the odds of both you and your spouse passing at the same time are very slim. There are a lot of single people with a decent sized lump of cash in the bank, and maybe $50,000 in credit card or school debt. Without a Transfer on Death, their assets would go through probate and be reassigned to cover their debts. However, after this piece of paper has been filled out and signed, their assets would instead go directly to the beneficiary or beneficiaries named in the Transfer on Death document. This would even come into play in situations of home equity. For example, you owe 350k on a first home equity loan and 250k on a second. Your house is worth 500k, and you have 70k in the bank. Through normal probate process, the trust of the estate would liquidate the house and the deficient home equity balance would be covered before any of the surpluses of your bank account would be transferred to your heirs. In other words, in this specific example, your heirs would end up with nothing. You can decide for yourself the ethics of choosing between paying off the bank or providing funds to your heirs.The actual transfer process happens after death, at which point the beneficiaries must take steps to re-register the securities in their names. This typically involves sending a copy of the death certificate and an application for re-registration to the transfer agent.
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