The Importance of “Transfer on Death” Designations
I met with a client recently who told me of an interesting situation that she found herself in. Sadly, a few months ago she had learned that both her aunt and uncle who lived in Florida, had both passed away. She also learned that she was co-executor of their estate, along with another niece of the couple.
My client’s aunt and uncle did not have any children. They each had their own wills that are now going through the probate process, which for a number of reasons has turned lengthy. While in probate, the executors are not able to sell the home or automobiles of their deceased aunt and uncle. Making matters more difficult, my client lives in Wisconsin and the other co-executor lives in France. It is not easy to manage property that you’ve never owned from a great distance. Furthermore, there are ongoing bills to pay to manage the property as well as other final expenses that had to be satisfied.
The couple had bank and investment accounts but had not designated a “Transfer on Death” to the registration of the accounts. Therefore, these accounts are tied up in probate as well, and regardless of the expenses to manage the yard, pool, utilities, property taxes, insurance and clean-up of the home, the deceased couple’s money is not available to pay these bills. However, the executor has the responsibility to care for and manage the property, including paying the bills. How is she doing this? Out of her own pocket. So far, she relayed that she is in excess of $20,000 of her own money and countless hours of her time and travel, to care for her relative’s property.
Had the couple put a “Transfer on Death” designation on their accounts to their executors, the nieces would have had an immediate source of money to pay the bills and could have efficiently moved forward selling the property. “Transfer on Death” or “Payable on Death” are designations that can be added to the registration of non-retirement accounts, much like having a beneficiary of a retirement account or life insurance policy. TODs and beneficiary payouts efficiently avoid probate, providing an immediate transfer of money.
TOD seems like a no-brainer, so why wouldn’t the couple have added TODs to their accounts? My guess is simply, they didn’t know. The bank and the financial advisors should have taken the time to explain and offer the option. Personally, I’ve never had a client turn down an opportunity to add a TOD. Someday, their executors will experience the easier way, of the importance of their Transfer on Death designations.
LouAnn Schulfer of Schulfer & Associates, LLC Wealth Management can be reached at (715) 343-9600 or louann.schulfer@lpl.com. SchulferAndAssociates.com , louannschulfer.com or louann.biz
Securities and advisory services offered through LPL Financial, a Registered Investment Advisor. Member FINRA/SIPC.
