Want a Smooth Handoff? Consider a TOD Registration

Want a Smooth Handoff? Consider a TOD Registration

Let’s face it—when thinking about how we want to spend our time, estate planning doesn’t really bubble to the top of the list. The checklist of considerations can be long, beneficiaries need to be named, and many of us are hesitant to have “the talk” with our loved ones. 

And beware—a taxable account may slip through the cracks during the estate planning process. That’s why adding a transfer-on-death (TOD) registration might be right for you.  

“I see it all the time. Clients have high-value accounts, but don’t have a designated beneficiary or trust established and the assets will fall to the estate,” says Skyla Wolcott, team manager at TD Ameritrade. 

Debt Follows the Estate 

Simply put, your debt doesn’t disappear with your passing. Debts such as your mortgage, car loan, and even credit card debt follow the estate, and debt collectors might come calling. Those debts will become the responsibility of the estate and must be reconciled before any remaining assets can be distributed. 

The process of paying your bills and distributing what assets remain is called probate. Your executor is generally responsible for using your assets to pay off any remaining debts, which could mean selling off assets to pay those debts. If securities accounts do not have a TOD registration, creditors can go after those assets to pay off debts and it might “decrease the amount the heirs will see,” Wolcott says. 

A TOD Could Protect Your Taxable Accounts

If you own regular taxable investment accounts—that are not retirement accounts—you can designate a beneficiary by adding a transfer on death (TOD) registration to the securities portfolio. This would cover any type of non-retirement account, and could include portfolios with bonds, stocks, mutual funds, and cash. A TOD registration on your taxable accounts protects your assets and means “creditors can’t touch it,” Wolcott says. 

For taxable investment accounts that are protected with a TOD registration, “Once we receive the death certificate, we can get the assets transferred typically in 24 to 72 hours,” Wolcott says. That might compare to weeks, months, or even years of having assets tied up in probate. 

“The TOD is not highly complex. There is not a lot involved. It is a quick and easy form and just takes a matter of minutes to complete,” Wolcott says. “Just like an IRA designation, you can name a primary and contingent beneficiary. You can name multiple people as long as it equals 100%,” she says. 

Getting started: TD Ameritrade clients can use this form to add a transfer on death beneficiary agreement to taxable accounts. 

“Be aware of your options. This is one big one that I see people miss out on. A lot of people think when they write their will they are done. People need to know about estate planning,” Wolcott says. 

You may want to check with the estate attorney or tax advisor to your estate to confirm that your state participates in the TOD Security Registration Act. (See figure 1 below.) 

Want a Smooth Handoff? Consider a TOD Registration


The TOD Security Registration Act provides non-probate transfer of specifically registered investment securities from owner to named beneficiaries at the owner’s death. This status map shows where it’s in place. Image source: The Uniform Law Commission.

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