We are going to look at the estate administration implications of a transfer on death account in this post. But before we get there, we’ll provide some background information so you can see the entire picture.
The Probate Process
The simple will is the most commonly used estate planning document. If you use a will to facilitate asset transfers, you would name an executor. This is the person or professional fiduciary that would complete the administrative tasks after you are gone.
An executor cannot act in a vacuum without any type of supervision. A will is admitted to probate, and the Surrogate’s Court presides while the estate is being administered. This process serves a purpose because creditors are given a chance to come forward to seek payment.
There is also a proving of the will during probate. The court examines the will to make sure that it is valid, and anyone that wants to contest the will can come forward during this interim.
Probate is not inherently negative, but there is no getting around the fact that it is a bit problematic for the heirs to the estate.
No one wants to wait around for eight months or more to receive an inheritance after a loved on passes away, but this is the arrangement when an estate passes through probate. There is also a loss of privacy, because probate records can be accessed by anyone that has an interest.
Probate expenses include the executor’s remuneration, possible legal and accounting fees, a filing fee, appraisal charges, liquidation expenses, and incidentals. These expenditures reduce the estate’s value, and this will result in lower inheritances.
Transfer on Death Accounts
Now that we have explained why you may want to avoid probate, we can address the point of this post. You can add a beneficiary when you open up certain types of accounts. This is a transfer on death account or payable on death account.
The beneficiary has no access to the assets in the account while you are living, but they would inherit the account after your passing. They would simply obtain a copy of the death certificate and present it to the institution in question.
Banks offer payable on death accounts, and you can open this type of account at a brokerage. When you add a beneficiary to your 401(k) account, it is essentially a transfer on death account.
There are 19 states in the union that give you the ability to accept the transfer on death option when you register your motor vehicle, but New York is not one of them.
You can add multiple beneficiaries when you have a transfer on death account, and you can pass along different percentages to the respective individuals if you choose to do so. On the other side of the equation, multiple people can be co-owners of a payable on death account.
The transfer to the beneficiaries is not subject to the process of probate, so the negatives that we described in the first section would be avoided.
Revocable Living Trust Alternative
If probate avoidance is your objective, you should consider using a living trust instead of a payable on death account because there are additional benefits.
You would act as the trustee while you are alive, so you would have total control of the assets, and this would be a revocable trust. Your heirs would be the beneficiaries, and you would name a trustee to succeed you after your passing.
To account for possible incapacity, you can empower the successor trustee or another individual to act as a disability trustee if it ever becomes necessary. This is a meaningful advantage, because over 30 percent of the oldest old experience cognitive impairment.
When you have a living trust, you can include spendthrift protections, and the consolidation of ownership coupled with the probate avoidance will streamline the administration process.
It should be noted that a married couple can create a joint living trust, so this can be the ideal turnkey solution for a wide range of families.
Attend a Free Webinar!
We have recorded an on-demand webinar that you can view to gain a more thorough understanding of this process. In addition, we offer live webinars at times, and we urge you to join us if you can.
To see the dates and obtain more information, visit our Manhattan, NY estate planning webinar page.
- Are You Prepared for Long-Term Care Costs? - August 15, 2026
- How Often Should I Review My Estate Plan? - August 1, 2026
- What Happens When an Executor and a Beneficiary Disagree? - July 15, 2026
See Larger Map Get Directions