Beneficiary and Transfer on Death Designations (TOD): The Part Most People Forget

Most people think their will controls everything. It doesn’t.

Your outside accounts such as bank accounts, retirement accounts, and investment accounts follow the names listed on your beneficiary forms, not the instructions in your will or trust. That means these forms can completely override the rest of your Life Essentials plan.

And because life changes, these forms need to change with you.

What Beneficiary Designations Actually Do

A beneficiary designation indicates who should receive the assets in an account if something happens to you. This applies to things like:

• Retirement accounts (401(k), 403(b), IRA)

• Life insurance policies

• Annuities

• Some investment accounts

Beneficiary designation forms are contracts between you and the company that holds your account. A will is a set of instructions for the court.

Most of the time in the eyes of the law, a contract beats a will.

When you open a retirement account, life insurance policy, or investment account, you sign paperwork agreeing that the company will pay the money to the person you list as your beneficiary. That agreement is a contract. And the company is legally required to follow it.

A will controls assets that don’t already have a contract attached. If an account has a beneficiary listed, the company must send the money to that person, even if your will says something different. Companies don’t look at your will; they look at their form. Financial institutions don’t read wills. They don’t wait for probate. They don’t ask what you “meant.”

They look at the beneficiary form they have on file. If it’s outdated, incomplete, or wrong, the money goes to the wrong person even if everyone knows that’s not what you wanted.

Do you really want your ex from 20+ years ago to inherit your hard-earned savings?

What TOD and POD Mean

Depending on your state's laws, you could add a Transfer‑on‑Death (TOD) or Payable‑on‑Death (POD) designation to many accounts, including:

• Bank accounts

• Brokerage accounts

• Vehicles (on the title)

• Real estate (with a TOD deed)

These tools let you name who receives the asset directly. No probate. No delay. No confusion. The forms allow you to name who should receive certain assets automatically when you die without going through probate.

But just like beneficiary forms, they only work if the names are correct and current. Reviewing and updating your TOD, POD, and beneficiary designations at the same time you update your Life Essentials documents is a great idea. See last week's post discussing how frequently you should consider doing this: When Should You Update Your Life Essentials Documents? | Denise Bonk, Attorney at Law

Although each asset may have its own form or process, they accomplish the same objective. Here is some information that you will need when updating your beneficiaries and TODs:

• Use the correct form. For real estate, your attorney prepares a TOD deed using Indiana’s statutory format. For vehicles or accounts, you can request a TOD or POD form from the bank, broker, or BMV.

• Name your beneficiary clearly. Use full legal names and addresses. If it’s a charity, include the EIN.

Updating your beneficiary and TOD forms take minutes to update. They are a simple way to make sure your assets move smoothly to the people you care about.

The information provided is an overview and general in nature. Different states have different law and rules for using a TOD or POD for deeds and titles. Because these forms and designations carry significant legal weight, you should consult with an attorney to not only ensure that they are completed correctly but also to coordinate with your overall Life Essential plan.

Denise Bonk, Attorney at Law

317-202-5773 (talk or text available)

denise.bonk@outlook.com

PO Box 40233 Indianapolis IN 46240

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