When people in Washington consider their plans for the future, they may want to consider not only making out their will or developing a trust but also assigning proper beneficiaries for bank accounts and other funds. A transfer on death beneficiary named on an account will receive the assets in that account upon the death of the owner. These kinds of transfers take place outside the probate process, so they can be quicker and easier than waiting to distribute these assets using your will.
Using a transfer on death beneficiary
You can name a transfer on death beneficiary for many different kinds of accounts, like savings accounts, retirement funds and brokerage and investment accounts. You can name an individual person as the beneficiary, but you could also name a trust, business or charity as the recipient. You are not required to name only people with a certain relationship to you; you have the complete freedom of choice to name any beneficiary you want, although your spouse is still entitled to their statutory rights.
Reducing costs and time
This means that your retirement funds, including IRAs and 401(k)s, can pass directly to your named beneficiary without waiting to go to probate court or process the will. The same is true of your investment funds and brokerage accounts, due to the Uniform Transfer on Death Securities Registration Act.
While naming a transfer on death beneficiary can help your heirs to save time and money by avoiding probate, it is important to keep your beneficiaries up to date. For example, if you divorce, one of the things that you can do to update your estate plan is to change your designated beneficiaries to reflect your situation; the same is true if you remarry or have another child. Even if you update your will, this will not affect your named beneficiaries unless you specifically contact your bank or fund provider in order to ensure they are correct and current.