Transfer-on-Death Accounts


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Article by Oren Ross

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Transfer-on-death agreements are an option used for those who wish their investment and bank accounts to be transferred directly to a beneficiary upon their death, without having to go through probate. In Georgia, you may use a TOD denomination for financial assets, if you wish to cut down on the time and expenses related to probating your estate. You may name one or more beneficiaries to receive your assets, but not every asset in your estate will be eligible for a TOD agreement and may still require probate. TODs are also known as a "poor man's trust" because a TOD account can be pulled into probate, but will usually avoid it.

Do You Need to Pay Taxes on a TOD account?

Because TODs are considered part of your estate, it may be subject to gift tax, depending on how much money your TOD account holds. If the account holds funds above the federal lifetime gift tax exclusion amount, your estate will likely need to file a tax return. You also need to consider whether your beneficiary lives in a state that requires payment of the inheritance tax. Currently, the states of Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania have the inheritance tax requirement.

Your beneficiaries will not be required to pay income tax on the amount they receive through a TOD account, but may be required to pay income taxes on any interests and dividends produced by that account during the following year. Regarding capital gains tax, your beneficiaries may be taxed for any gains in the value of inherited stock, having as a basis the stock’s value at your death.

Does a TOD Override a Will?

Yes. A transfer-on-death account supersedes a will. Even if you name a different beneficiary on your will, the person named as the recipient of an account with a TOD agreement will receive the money. This is why it is so important to make sure you include all of your TOD accounts as part of your estate plan. TOD accounts are in some ways similar to a trust—you may make changes to it while you are still alive and add or remove beneficiaries at any point.

A common issue that may cause disputes or undesired results is when the owner of a TOD account forgets to update it with the right beneficiaries. This can cause undue stress and result in your assets being transferred to an ex-spouse or to a sibling instead of going to your current spouse or children. Make sure to include your TOD accounts as part of your estate plans and update them regularly to ensure the funds in them end up in the right hands.

Are TOD Accounts Allowed in Georgia?

In the state of Georgia, assets such as savings accounts, certificates of deposit, and other bank accounts can have a POD (payable-on-death) designation, which also works as a way to transfer assets to a beneficiary, usually without requiring probate. It is also possible to register stocks and bonds with a TOD form. However, it is important to highlight the fact that Georgia does not allow transfer-on-death deeds for real estate or transfer-on-death registration for vehicles.

If you would like assistance to create your estate plans and avoid probate in Georgia, contact our probate lawyers at Oren Ross & Associates by calling (404) 463-1752. We have the skills and knowledge to assist you with all your probate and estate planning needs.

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