Michael Bailey Law, LLC

Meeting in-person (w/ proper social distancing) and Zoom

720-730-7274
  • Home
  • About
    • Partners
  • PRACTICE AREAS
    • Estate Planning
    • Special Needs Trusts
    • Educational Trusts
    • Pet Trusts
      • Saying Goodbye
      • Blog #1
      • Blog #2
    • VA Benefits
  • Blog
  • Radio Shows
  • Contact
    • Law Office Locations (15)
    • Refer Michael
  • Book
  • Toggle Mobile Menu
  • Toggle Search
  • 720-730-7274
  • Google Plus
  • RSS
  • Email

What’s the Big Deal with Transfer on Death and Pay On Death Designations?

Years ago, I was in a professional networking group with an individual who wanted to know how to avoid probate.  I discussed how they might use a trust, or joint ownership or joint tenancy for real estate, or a beneficiary’s deed, or other methods that do not need to go through probate.  This person listened and said, “Yeah, sure, that is how people can pay you, but how can I do it without needing to pay for it?”

The individual from the networking group had described how they had all of their assets in investment accounts, or bank accounts.  The individual told me that they knew if they put pay on death or transfer on death designations on all of those accounts, then the accounts would transfer according to those designations.  The person told me they just needed to have me confirm it would work.  They then went one step further to tell me that is why they didn’t need a will, and didn’t need me, which seemed kind of strange given that they had just asked me to confirm their plan would work.

I declined that invitation, as I am not super keen on giving free legal advice, nor am I free on endorsing someone else’s strategy.  I also recall that I exited that professional networking group soon thereafter.  I decided I did not really want to be associated with a group of people who did not understand the value of my services.

Of course, had the individual not been so rude and unprofessional, we could have had a conversation about how pay on death and transfer on death designations really are a great tool in estate planning, and they can avoid probate for certain assets.  Pay on death designations and transfer on death designations apply to different types of accounts.  Pay on death designations and transfer on death designations allow you to choose who will receive an asset, and that transfer will take place outside of probate.  But, my professional opinion is that everyone still needs a will.

 

What is the Difference Between a Pay on Death Designation and a Transfer on Death Designation?

Although a pay on death designation and a transfer on death designation function similarly, the type of account each applies to is different.  Both types of designation allow you to designate who will receive the asset after you pass away.  You can decide who will get the asset, let the entity that holds the asset know who the recipient will be.  Upon your death the named person can then let the entity know you have passed away, and claim the asset.

Pay on death designations generally are connected to bank accounts.  The bank will have you fill out a form to name a person to receive money in the account when you die.  The bank keeps this form on file, and the named beneficiary can go claim the money from the account, usually by filling out paperwork and giving the bank a copy of your death certificate.

Transfer on Death designations work the same way, but usually apply to investment accounts.  The reminology is a bit different, but the transfer happens through the investment company as a contract transaction between the company and you, and not through probate.

 

Pay on Death and Transfer on Death Designations Take Precedence over a Will

Nearly everyone I meet with asks me if the will overrides a pay on death designation or a transfer on death designation.  The answer is that a pay on death designation or a transfer on death designation controls what happens to the funds in the account with such a designation attached to the account.  imply setting up a will does not change the pay on death designations or a transfer on death designations.

 

Watch Out for Potential Problems

Instead, you will need to check the listed beneficiaries of all pay on death designations or a transfer on death designations for every account you have to make sure everything agrees.  You don’t want your will to conflict with your pay on death designations or a transfer on death designations.  That is a great way to get conflict, fights, and legal challenges to your estate plan.

In addition to this potential issue, you also may run into the problem of old, outdated, or incorrect pay on death or beneficiary designations.  I have had many clients who have divorced and remarried.  They are shocked to find that an investment account still had an ex-spouse named as a beneficiary of a transfer on death designation, or pay on death designation.  I am always happy when people double check their pay on death designations, transfer on death designations, and beneficiary designations they avoid money going somewhere they don’t want it to go!

Of course, if you are like the person from my networking group, and want to have all of your accounts set up with pay on death designations or transfer on death designations, then you create a lot of work for yourself.  You will need to keep track of every bank, financial, and investment account you have and keep those up to date every time you make a change to anything, or add a new account.  Most of us, probably including you, don’t have the time or inclination to keep track of all of your accounts, all the time.  If you do, excellent!  If not, then you probably want to consider not relying solely on pay on death and transfer on death designations.

 

You Still Need a Will

Your will may not override a pay on death or beneficiary designation, but it does serve as a safety net for financial accounts that do not have such a designation.  The will can distribute any assets without a pay on death or beneficiary designation to the people you pick, and ensures your wishes are carried out.  Even if you have pay on death or beneficiary designation, you still want a will.

 

Everything Should Work Together

You want your will and your pay on death or beneficiary designations to work harmoniously.  By working with an experienced estate planning attorney, you can have everything work together and accomplish what you want.  You can make an appointment to discuss making that happen by going here.

 

11001 W. 120th Ave. Suite 400
Broomfield, CO 80021

15 Other Locations

Next Post »
«Previous Post

About Michael Bailey

Michael Bailey has practiced in the Denver, Colorado area since he became a licensed attorney specializing in estate planning, and tax law as it relates to estate planning. He is a member of the Colorado Bar Association, and a member of the Trust and Estates section and Elder Law section, as well as the Denver Bar Association.

Michael Bailey Law, Estate Planning attorney Denver Office Hours
Monday-Friday 9:00am - 5:00pm

Michael Bailey Law
11001 W. 120th Ave. Suite 400
Broomfield, CO 80021

Other Locations

Contact
720-730-7274 (phone)
720-247-9056 (fax)
michael @ michaelbaileylawllc.com
We Appreciate Your Reviews
Follow Us on Google+

Follow our Updates!

Tweet to @Michael11506 Tweets by @Michael11506

Recent Posts

How Long Will it be Until my Living Trust is FUNDED?

Yes, You Have to Do Something to Complete Your Estate Plan

Michael Bailey, As Heard On

KLZ-560100v2
wcmember

Get Started With A Free Consultation

Please consult an attorney for advice about your individual situation. This site and its information is not legal advice, nor is it intended to be. Feel free to get in touch by electronic mail, letters or phone calls. Contacting us does not create an attorney-client relationship. Until an attorney-client relationship is established, please withhold from sending any confidential information to us.

Website created just for Michael Bailey Law, LLC by Personable Media

View our Privacy Policy

Law Office Locations

Aurora
6105 S. Main Street, Suite 200
Aurora, Colorado 80016

Boulder
4845 Pearl East Circle, Suite 101
Boulder, Colorado 80301

Broomfield
11001 West 120th Ave, Suite 400
Broomfield, Colorado 80021

Cherry Creek
501 S. Cherry St., Suite 1100
Cherry Creek, CO 80246

Denver
1580 Logan St Floor 6

Denver, CO 80203

Denver Metro North/Northglenn
11990 Grant Street, Suite 550
Northglenn, CO 80233

Fort Collins
2580 East Harmony Road, Suite 201
Fort Collins, Colorado 80528

Greenwood Village
7350 East Progress Place, Suite 100
Greenwood Village, Colorado 80111

Golden
14143 Denver West Parkway, Suite 100
Golden, Colorado 80401

Lakewood
355 S. Teller Street, Suite 200
Lakewood, Colorado 80226

Littleton
4 W. Dry Creek, Suite 100
Littleton, CO 80120

Louisville
357 S. McCaslin Blvd, Suite 200
Louisville, Colorado 80027

South Hover Longmont
1079 S. Hover Street, Suite 200
Longmont, CO 80501

Schedule An Appointment

Michael will reach out to you shortly.

Pick The Time For Your Callback. Schedule Your Call Now ⬇️

Your ebook will be emailed shortly.

Download the checklist

Schedule An Appointment