Individuals who live or own property in California may want to avoid going through probate. Certain assets can avoid the probate process by placing a transfer on death, or TOD, designation on them. Bank accounts, the deed to a house and other assets typically qualify for this designation. It is important to note that once this designation is made, it trumps any language placed in a will. Therefore, it is important to regularly review TOD accounts.
Beneficiaries do not have any access to an asset prior to the current owner’s passing. In some cases, the asset will first transfer to a surviving spouse before the beneficiary can make a claim to it. If a beneficiary is under the age of 18, assets will need to be managed by a guardian. Guardians can be appointed by the court or named as part of an overall estate plan.
Another potential pitfall is that creditors can still go after items transferred with a TOD designation. To avoid creditor claims, it may be easier to put items into a trust instead. Assets can be divided among as many different beneficiaries as an individual desires. Furthermore, they do not have to be divided equally, and that may provide flexibility in how a parent or grandparent chooses to pass down wealth.
There are many variables that individuals need to answer when it comes to meeting their estate planning needs. By using a TOD designation, it may be faster and easier to transfer assets without a lot of hassle or stress. As the assets will transfer to a beneficiary automatically, the odds of a legal challenge are relatively low. However, meeting with an attorney may a good idea for those who want to do everything that they can to prevent family infighting.