A client is opening a new account and wants to ensure that their assets are automatically transferred to their designated beneficiaries upon their death, bypassing probate. Which of the following account designations would achieve this goal?
- AJoint Tenants with Right of Survivorship (JTWROS).
- BTenants in Common (TIC) account.
- CTransfer on Death (TOD) registration.
- DIndividual Account with a Power of Attorney.
Show answer & explanationAnswer & explanation
Correct answer: C. Transfer on Death (TOD) registration.
A Transfer on Death (TOD) registration allows the account owner to designate beneficiaries who will automatically receive the assets upon the owner's death, bypassing the probate process. While JTWROS also bypasses probate for the surviving tenant, it's specific to joint ownership. An Individual Account with Power of Attorney is for management during life, and Tenants in Common accounts typically go through probate for the deceased's share.
Why the other options are wrong
- A. JTWROS bypasses probate, but only for the surviving joint tenant, not for designated beneficiaries in a broader sense.
- B. In a TIC account, the deceased owner's share passes to their estate and typically goes through probate.
- D. A Power of Attorney grants authority during life, but does not dictate asset distribution upon death, which would typically go through probate.
Transfer on Death (TOD) Registration
A TOD registration allows an individual account owner to designate beneficiaries who will receive the account assets directly upon the owner's death, thereby avoiding probate.
- Bypasses probate process.
- Designated beneficiaries receive assets directly.
- Owner retains full control during their lifetime.
- Available for individual and some joint accounts.
Memory trick: TOD is the 'Direct Delivery' service for your assets after death.