An estimated 57 percent of adults in New York and throughout the United States don't have a trust or will. When these individuals pass away, family members must go to a probate court in order to sort out the finances of the deceased. Even those with wills must often go through probate. This can cause contention and hostility between family members and friends. A transfer on death (TOD) account may be the solution to these issues.
A TOD account will automatically transfer the assets to the named beneficiaries upon the death of the account holder. Multiple beneficiaries can be named, and the account can be divided up evenly between these beneficiaries. For example, those with $300,000 in a savings account who name their three children as beneficiaries would be able to give each of the children $100,000 upon their death.
While the account holder is still alive, the beneficiaries are not able to access any of the money. Upon death, the executor sends a copy of the account holder's death certificate to the bank or brokerage. The bank will then transfer the money to the beneficiaries. A TOD account does not have to enter probate and supersedes any wills, simplifying the estate process.
Those who die without a will are often referred to as "intestate." The estate must go to probate court and then will be divided according to the laws of that state. In New York, the closest living family member receives the transfer of assets of the estate. If the deceased did not desire to have this individual receive this money, court battle may result. In the case of a TOD account, an individual would not have to draw a will in order to give their estate to the individuals they desire, and probate court can be avoided.