Should I establish a TOD for my investment assets?

If you want your survivors to avoid probate after your passing, consider incorporating a transfer on death (TOD) account for your investments. Having TOD accounts are viable alternatives for many families in Wisconsin and make the beneficiary process easier after you die.

What is a TOD account?

TODs are common for investment accounts such as mutual funds, stocks, and bonds. Many brokers will suggest this option to older individuals. To receive the funds from TOD accounts, beneficiaries simply need to provide the investment company with a death certificate after the account holder passes away.

Benefits beyond avoiding probate

Establishing one or more TOD accounts can be an invaluable estate planning tool. Most investment companies make the TOD process easy. Even if you already have investment accounts, you can change your accounts to reflect the TOD designation. TOD accounts make funds available to beneficiaries almost immediately, which can be helpful to pay funeral expenses and debts. However, because there is no need for probate, you need to coordinate your will carefully, and living trusts as a TOD will often supersede those documents.

When TOD accounts don’t make sense

Despite their simplicity for beneficiaries, TODs aren’t good choices for all situations. If you have minor children as TOD beneficiaries of your accounts, they may not be eligible to receive investments under Wisconsin law, so a court-supervised guardianship or conservatorship must be established to manage the accounts. If you are in a second marriage and have named your new spouse as your beneficiary, that person can change the beneficiaries for all subsequent beneficiaries after your death.

Managing TOD accounts

Review your TOD accounts periodically through the estate planning process. Working with legal professionals experienced in creating estates can go a long way to ensuring that your assets go to the right beneficiaries.