Transfer
on death registration lets you name someone to inherit your stocks, bonds or
mutual funds in your brokerage account(s) without probate. It works very much
like a payable on death bank account. You register your ownership either with
your stockbroker or financial adviser and make a request to take ownership in
what's called a “beneficiary form.” This form will show your ownership and will
also show the name of your beneficiary. To be clear, after you have registered
ownership this way, the beneficiary has no rights to the stock as long as you are
alive. You are free to sell or give away your stock, name a different
beneficiary or close the account all together. But on your death, the beneficiary
can claim the securities without probate simply by providing proof of your death
and some identification to the broker or transfer agent.
The
benefits of using a transfer on death registration are:
·
It
is easy to create;
·
Designation
of a beneficiary costs little to nothing;
·
It
is easy for the beneficiary to claim the securities after the original owner
dies.
The
only downside to using this method is your broker’s policies might not allow
you to name an alternate beneficiary – but check with your broker first.
If you have a brokerage account, or more than one as
many people do, you should contact your broker or financial advisor for
instructions. Most likely the broker will send you a form on which you will
name one or more beneficiaries to inherit the stocks in your account at your
death. From then on, the account will be listed in your name with the
beneficiaries like this “Mary Doe T.O.D. Jim Doe.”
If you want to name more than one beneficiary for
your transfer on death designation, just name all the beneficiaries on the form.
Each will inherit an equal share of your stocks unless you specify otherwise. However,
you can leave the beneficiaries unequal shares if the stockbroker or transfer
agent’s policies allows it (check with your advisor).
It your broker’s policies allow it, name an
alternate beneficiary. If the primary T.O.D.
beneficiary dies before you do, the alternate will inherit.
Instead
of using a transfer on death registration, it is easy to put your security
assets into your Revocable Living Trust by registering your stocks, bonds and
mutual funds as trustee of your living trust. All brokers and mutual fund
companies will help you. It's even easier if you set up accounts to consolidate
all your investments at a big investment company such as Charles Schwab or Fidelity.
You can put your entire account into the living trust and then automatically
buy and sell securities in the name of the trustee. Once your account is in the
trustee’s name, all securities in the account are then held in trust. That
means you can use your living trust to leave all the contents of the account to
a specific beneficiary. If you want to leave stock to different beneficiaries,
you can either establish more than one brokerage account or leave the contents
of a single account to more than one beneficiary to be owned together.
But
always consider transfer on death registration before registering stocks, bonds
or mutual funds in the name of your living trust.
For more information, visit my website at RudolphLegal.com.
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