Beneficiaries are a major focus in your estate-planning strategy, and you want to make sure that upon your death the transfer of assets to them will be handled smoothly.
One simple way to transfer certain assets and avoid probate is to have TOD- or POD-titled accounts. You probably own at least one such account, but is the beneficiary designation up to date?
TOD and POD explained
“Transfer on death,” known as TOD, and “payable on death” or POD are very similar. You can name a beneficiary on items such as your checking, savings or investment accounts and even on the title to your vehicle. The designation means that upon your death, the of funds or property transfers directly to the individual you name without having to pass through probate. Keep in mind, however, that the beneficiaries you name on TOD and POD accounts take precedence over whatever is stated in your will; in other words, the names should match. If you have not updated the names, the balance in your savings account could go to your first wife, for example, rather than to your current spouse.
Opportunity for errors
In addition to your checking, savings and investment accounts, you may also have retirement accounts, annuities and one or more life insurance policies, and all may have outdated TOD or POD beneficiaries. As you age, your assets accumulate, your estate planning strategy becomes more complex and it is easy to overlook matters pertaining to beneficiaries. You may have named different people on different accounts decades ago, and then put the matter aside, thinking you had done your duty. This is exactly why your estate plan should undergo a regular review.
Changes in circumstances
You may have remarried recently. Your first grandchild may have arrived. A beneficiary named in your will might now be deceased, but you still have him or her as the beneficiary on one or more of your TOD- or POD-titled accounts. There is no time like the present to engage the help of an attorney to update these accounts and make sure they coordinate properly with your will and overall estate plan.