The estate planning process isn’t just about drafting wills and funding trusts to guide the probate process. It also frequently involves planning to keep certain assets out of probate court altogether. Attaching a payable on death or transfer on death designation to a financial account is one way to keep that asset in particular out of probate court.
After someone dies, that designation allows for the quick transfer of the account to a specific person. The beneficiary named in the paperwork that a testator files with their financial institution can bring government identification and a copy of the death certificate to the broker or bank to gain access to and control over the account without it ever passing through probate court.
Bypassing probate is a valuable move, as it prevents creditors from making a claim against those assets in many cases and can also diminish the value of an estate to reduce tax concerns. However, someone’s wishes about who inherits their property may change years after they first file their paperwork with their financial institution. Can someone revoke or modify a payable or transfer-on-death designation for personal financial accounts?
Yes, anyone of sound mind can update their documents
Keeping one’s financial assets out of probate court and minimizing the risk that they will end up consumed by creditor claims, taxes or probate costs is often a top priority for those with checking, savings, investment and retirement accounts. Simple financial accounts at banks often have payable-on-death designations, while investment accounts may have transfer-on-death designations instead.
Provided that the financial account in question is still open and in good standing and that the account owner still retains their testamentary capacity, they could potentially go back to the bank at any point to update the paperwork that they initially filed. Of course, if there are multiple owners of the account, everyone will typically have to agree to the update.
The account owner typically won’t require approval to make those changes. Although they don’t necessarily need to directly notify the beneficiary who will no longer inherit the account, doing so is often the best approach to the situation.
It is actually very important that those with specific wishes regarding their property after they die to maintain updated transfer-on-death designations and beneficiary designations with their life insurance providers. Making the right changes to estate plans as life changes will give testators the most control possible over the legacy they leave.