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Could transfer on death accounts bypass probate?

On Behalf of | Apr 7, 2021 | Estate Planning And Probate

Probate might be a legal process that surviving Minnesota relatives may wish to avoid. Probate requires the courts to review the will and oversee several steps, including covering the estate’s debts before distributing assets. While the estate won’t find creditors going away, there are ways to avoid probate with certain aspects. When the benefactor/testator sets up transfer on death (TOD) designations, an account may pass to a beneficiary outside of probate.

The transfer on death designation

Brokerage firms commonly afford the option to name a beneficiary to receive assets upon the account holder’s death. Stocks, mutual funds, bonds and other investment assets may transfer to the new owner in this manner. Be aware that joint accounts would move to the other account holder if one dies. TOD beneficiaries only collect when all primary account holders pass away.

Rather than procuring a “letters testamentary” from the court and having the executor contact the investment firm, the beneficiary may do so directly. Of course, an executor or attorney may do so as well, if the beneficiary prefers. Regardless, the firm will require a death certificate for proof. Many brokerage firms will require the completion and submission of a “death benefits” form. The transfer from the deceased owner to the new one should move forward upon receipt of required forms and documents.

Avoiding the probate process

Probate could be a cumbersome process that ties up surviving relatives and may force them to wait for asset distributions to occur. Transferring a TOD account could conceivably commence as soon as the beneficiary submits the death certificate. The transfer process doesn’t come with any costs, either.

Directing questions about estate planning and probate to an attorney might be advisable. An attorney could discuss various planning steps, with transfer on death plans possibly being among them.