Transferring assets has variety of options
Some methods are more cost-effective than others offer
Q: I’m a 60-year-old single woman who hopefully has all my finances in order. I have beneficiaries on all of my accounts and a will, but I don’t have a trust.
Considering the cost of setting up a trust is expensive and the only things I would have to put in it are my house and car, my financial guy suggested setting up a transfer of death instrument for my home.
What do you think about this? It seems simple enough to fill out a form and register it. Thanks.
A: When it comes to transferring assets, there are a lot of ways to do it, some more cost-effective than others.
There are a variety of trusts that could be written to solve the problem. Some, like generation-skipping trusts, might be more complicated than a living trust that is used to simply assist in transferring assets.
The fact that you have a financial “guy” is helpful in and of itself. Good financial advisers should recommend services or products that can make their clients’ lives easier, and we’re glad he brought this up in your estate planning conversations.
If you want to transfer assets like bank accounts, insurance proceeds, retirement accounts, securities, vehicles, boats and real estate, almost every state has enacted legislation allowing you to use a transfer on death (TOD) instrument for some, if not all, of these uses. A TOD allows your named beneficiaries to claim their property after your death, bypassing probate.
Some types of assets are well-suited to a TOD, while others can be simply covered by naming your heirs as beneficiaries when you open up those accounts. If it doesn’t happen when the accounts are opened, you can ask the financial institution for paperwork and use it as needed, such as when your life or priorities change.
Since you didn’t ask about your bank accounts, 401(k) and other retirement accounts, and other similar assets, we assume those are already managed appropriately. Still, you’ll want to go over everything with a fine-tooth comb, including bank accounts, insurance policies, savings accounts, stock accounts, savings bonds, IRAs, 401(k) accounts, annuities, boat and motorcycle titles, etc.
When it comes to your home or vehicle, a TOD might be a good solution. Typically, you prepare the TOD document and have the document recorded or filed with the office that handles real estate records. Once filed, you are giving notice to the world that upon your death, the title to the home should go to the person designated on the TOD form.
You might need help from an attorney, title agent or someone knowledgeable about the title to prepare the TOD for your home.
And be sure to think it through. If the person designated on the TOD form predeceases you, the home may need to be probated and the TOD would have been for nothing. TOD forms don’t necessarily have the same flexibility that you have with a last will and testament.
When it comes to your car, you might be able to use a TOD. While you don’t need to file the form, you’ll have to work with the agency that handles vehicle registrations to change the registration to name the person under the TOD.
If the TOD for your home and car takes care of the last remaining items in your estate, you should be in good shape. You’ll want to hand a copy of your documents to whoever you want to take care of your estate. And you should still write a will, just in case something doesn’t go right.
Some of our readers may live in places where TODs are not available for every type of asset. Make sure that your state allows TODs for each type of asset you want to transfer upon your death. As more states allow TODs, it will be easier to get these done. Many large financial institutions now allow TODs for stock, investment and bank accounts, but if TODs aren’t allowed in your state for a home or car, this won’t be an option for these assets.
Finally, make sure you keep your TODs up to date. Use a new one when you open up a new account, buy a new car, there is a change of circumstances where the person designated on the TOD dies or become incapacitated, is no longer able to handle financial affairs or you no longer want that person to get your assets.