We often talk about naming beneficiaries for IRAs, 401(k)s, and 403(b)s, but what about your taxable investment accounts? A Transfer on Death (TOD) agreement is an easy solution to ensure your investments pass smoothly to your loved ones—without the lengthy and often expensive probate process.
So how does it work? A TOD allows you to name beneficiaries who will inherit your account after you pass away. You’ll keep full control of your account while you’re living, and your beneficiaries won’t gain access until you’re gone. This can make the process of transferring assets quicker and far less complicated.
You might also hear about a Payable on Death (POD) agreement for bank accounts and CDs. It works similarly to a TOD but applies specifically to those types of accounts.
The great thing about both TOD and POD agreements is that they keep things simple. There’s no need for complex estate planning documents—just fill out a form with your custodian to set it up. And because these agreements bypass probate, your loved ones can avoid some of the headaches that come with settling an estate.
One important tip: Be sure to keep your beneficiary designations up to date. Life changes like marriage, divorce, or the birth of a child may mean revisiting your designations to ensure everything is aligned with your current wishes.
A TOD agreement is a simple yet effective way to make sure your assets go where you want them—quickly and efficiently.
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