Trust Administration

What does a "Transfer on Death" designation mean?

Q: What does a "Transfer on Death" designation mean?

A Transfer on Death designation allows the principal owner of an asset, such as a vehicle, to maintain absolute control over the asset until their death. Upon their death, the asset passes to the Transfer of Death beneficiary automatically, without having to go through probate.

The Transfer on Death designation is preferable to adding another person as a joint tenant to the title of an account or a vehicle because joint tenancy ownership has some disadvantages. These include the fact that the joint tenant may wish to sell the asset later when the principal owner wants to hold on to it, or that the joint tenant refuses to sell an asset even though the principal desires to. Resolving these issues can be difficult.

Another benefit Transfer on Death has over joint tenancy is that you can add a Transfer on Death beneficiary and later change your mind and remove them. If you add a joint tenant, you need their agreement later to get them off the title to the asset.

Different states allow Transfer on Death beneficiaries for various assets. In Vermont, they have recently been allowed for vehicles. Similar options, such as a Pay on Death designation, are available for some financial accounts. For deeds to real property, it’s more complicated, and an estate planning attorney should be consulted.

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