One of the ways that you can arrange for the transfer of assets to your loved ones after you pass away is by the creation of payable on death or transfer on death accounts. As the name implies, you add a beneficiary when you create the account at a bank or a brokerage. Upon your passing, this beneficiary assumes ownership of the resources that remain in the account.
The transfer of assets that takes place is not subject to the probate process. Because of the fact that probate is time-consuming and potentially costly, implementing solutions that enable probate avoidance is attractive to many people.
There are however some things that payable on death accounts do not achieve. These accounts do nothing to reduce your estate tax exposure if you are indeed in taxable territory because you are the direct owner of the resources throughout your life. The money in the account is part of your estate for tax purposes.
Incapacity issues are another thing to consider. Unlike a revocable living trust, you cannot allow for the beneficiary to have access to the funds in the account upon your incapacitation.
And, there are those who verbally instruct the beneficiary to distribute the resources in a particular manner. The problem with this is that there are no guarantees with regard to how the beneficiary will proceed after your death.
Payable on death accounts certainly have their limitations and they are not a comprehensive solution by any stretch of the imagination. The best way to put together a holistic estate plan that satisfies all of your wishes in an ironclad manner is to sit down and discuss everything with a licensed and experienced Nassau County estate planning lawyer.