Estate planning is all about getting WHAT is valuable to you distributed to WHO you want, WHEN you want after you are gone. Getting assets distributed in an efficient and cost effective manner is also important. Avoiding costs of money and time can be accomplished by avoiding the court system for the distribution of an estate.
Probate avoidance is a common estate planning goal for many people. And, rightfully so. While the probate process has been simplified over the years, the fact remains that the probate process continues to be time intensive and potentially costly. In many cases, a revocable living trust is used as a financial tool to avoid probate. Another less known vehicle is the Transfer on Death (“TOD”) designation that can be added to accounts such as bank accounts and taxable brokerage accounts.
A TOD account acts much like a beneficiary designation on an IRA, 401k or even life insurance policy. At the owner’s death, the account bypasses probate and is paid directly to the person named on the TOD form. Some firms may charge $50-$100 to establish a TOD, but many also provide such an account for free, making this a cost effective alternative to having a Living Trust drafted.
Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James.