by Jon A. Keyes October, 2011
Transferring funds in financial accounts (checking accounts, savings accounts, retirement accounts, etc.) upon death can be uncomplicated. The owner of a financial account can simply name a "payable on death" beneficiary and the account funds will automatically transfer to that beneficiary upon the owner's death. The transfer of funds is considered outside the "probate" process, so a will or trust is not needed for the transfer of those assets. There is thus no need to take any court action to ensure the beneficiary receives the assets.
The Indiana legislature recently passed new laws that expand this ability to transfer assets using a payable on death concept. The new Transfer on Death Act was designed to allow the transfer of real estate, automobiles, and other assets upon death similar to transferring assets in payable on death financial accounts. Real estate and automobiles can now be titled in a manner that allows for the automatic transfer of the asset to a designated beneficiary upon the owner's death. The owner simply names the beneficiaries in the deed or title. Upon the owner's death, ownership of assets transfers automatically to the beneficiary outside of the probate process.
When utilized properly, use of the Transfer on Death Act to name a beneficiary on death provides several estate planning benefits. In Indiana, a person's estate must be administered through the court system (the "probate process") if the net value of the person's assets, upon death, exceeds $50,000. For a person whose "probate" assets do not exceed that amount by much, the Transfer on Death Act can be utilized for keeping assets from being counted against that $50,000 threshold and thus avoid the probate process. The probate process can last several months, requires significant work by the person appointed to administer the estate, and requires the incurrence of attorney fees, so use of the Transfer on Death Act for smaller estates can thus be beneficial.
Even for a person with a large estate, the provisions of the Transfer on Death Act can be used to make sure particular assets pass directly to beneficiaries upon the death of the owner so those assets are not tied up in the administration of the remainder of the assets through probate. There may be reasons why a parent would want a certain parcel of real estate to be transferred to a child immediately upon a parent's death, for example. Thus, evaluation of all of a person's estate planning goals may result in use of the Transfer on Death Act as part of the overall estate plan that also involves the use of a will and/or a trust.
There may be several other advantages to using the new Transfer on Death Act in your estate plan. If you are interested in learning more about this unique estate planning tool and whether it should be incorporated into your estate plan, please contact one of our attorneys to discuss your options.