Avoiding Probate Through POD and TOD accounts

Categories: estate planning

When individuals seek assistance with their estates, one of their top concerns is typically how to transfer their assets to their children or other beneficiaries with minimal delay and hassle. Often this means wondering if they can avoid the probate process.

Assets for estate purposes usually come in two forms: probate assets and non-probate assets. Probate assets are assets that the court must divide up for heirs, in accordance with a will or other written directive. Non-probate assets are assets that can circumvent the court and go directly to the beneficiaries who are intended to have them. Two ways that non-probate assets can be created and transferred are through payable-on-death (POD) and transferable-on-death (TOD) accounts.

Why Avoid Probate In North Central Wisconsin?

The reason for wanting to avoid probate is relatively straightforward – probate delays the transfer of assets to beneficiaries and it costs money. With probate, assets cannot be distributed from an estate until after potential creditors are given sufficient time to make claims against the estate, and all debts are addressed. This process usually includes a judge and usually a probate administrator or lawyer, who must also be paid.

POD Accounts

POD accounts are one of the easiest ways to ensure that some assets are available to your relatives and loved ones shortly after your death. In Wisconsin, you can add a payable-on-death designation to your bank accounts at any local bank. While you are alive the individual you have designated has no right or access to the account, but upon death the account immediately transfers to his or her name, allowing the funds to be accessed almost immediately. However, please note, these accounts are then not available to pay estate expenses, and the recipient has no obligation to pay estate expenses from their share.

Typically, all that is required for a designated beneficiary to obtain access to a POD account is to show proof of identification and a death certificate to the bank where the account is located. The funds will then become available for the individual to use or transfer into their own account.

Individuals planning their estate should be careful to make sure that POD accounts are fully considered in their estate planning. Some banks only allow one POD designated beneficiary on an account, which means the money in the account may go to only one child after death. If you would like assets to be split equally between children, the POD must be accounted for and assets adjusted accordingly, or the beneficiary must be directed to then equally distribute the proceeds of the account to his or her siblings. Further, many POD’s do not allow a per stirpes or by right of representation designation.

TOD Accounts

TOD accounts are quite similar to POD accounts. They are also accounts where the account holder can designate a beneficiary who will receive the assets upon death. However, TOD usually applies to brokerage accounts rather than bank accounts, including retirement and investment funds.

In Wisconsin, TOD can also be used to create TOD real estate deeds, which allow property to immediately transfer to a beneficiary. TOD deeds are signed and recorded while the individual who owns the property is still alive, but do not take effect until death. While the owner of the property is still alive, the beneficiary has no rights to the property and it can still be sold or transferred to another, which will nullify, but not violate the TOD deed.

TOD accounts can often be left in the name of more than one beneficiary. This means that the assets within the retirement or investment account will be split between these individuals at death. TOD account owners are free to split the assets between beneficiaries as they prefer – they do not have to split the assets equally. Again, please note, these assets are not available to pay estate expenses, and the recipient has no obligation to pay estate expenses from their share. Further, great care should be used in designating beneficiaries, as some companies may not allow a per stirpes or right of representation contingency.

Disclaimer: This Article Is Not Legal Advice.

Never rely on an article for legal advice as the law frequently changes, information may not be accurate, there may be exceptions to a rule, and reliance may be detrimental. Always consult one of our experienced attorneys for competent, current, and accurate legal advice.

Wisconsin Probate Attorneys Simplifying Your Probate Process

Estate planning is a highly individualized process that must consider the unique needs of every individual and their beneficiaries.

At Crooks, Low & Connell, S.C., our estate planning and probate attorneys can help you evaluate the assets that you currently have and determine the best way to structure those assets in order to minimize difficulty and expense upon your death. For more information, or to schedule a consultation, contact our Wausau, WI offices online or at (715) 842-2291.