Payable on Death | Transfer on Death

Other tools that avoid probate are account clauses called:

  • Payable on Death, or
  • Transfer on Death

By completing the proper forms at a bank or brokerage firm, a payable on death or transfer on death clause can allow the funds in the account to be transferred to the named beneficiary or beneficiaries.  When done properly these amounts will pass directly and not go through the decedent’s probate estate.

By passing outside a probate estate, the terms of a Last Will and Testament will not effect the transfer.  For example, if a will says the property is to be divided equally among the children, but a payable on death clause pays to only one of the children, then that child will receive an equal share of the probate estate plus the amount in the payable on death account.

These accounts can be used in coordination with an estate plan.  For instance, a small account with a payable on death clause can transfer the money in it to a beneficiary who could use it to pay immediate needs such as the funeral expenses, or other bills.  They can also be abused in that the beneficiary may keep the money and not pay anything.  If the money is taken or spent, and the estate does not have cash to pay the decedent’s creditors, the probate estate may incur costs in trying to bring the cash back into the estate to pay the creditors.  As with all the advice on this website, you should seek competent legal and tax advice from professionals who can advise you on your specific situation.

This article was written 1/23/2015 by Todd Willhoite, an estate planning attorney in Claremore, specifically for the Oklahoma jurisdiction.  A different result may occur in a different jurisdiction and the law does change, so it is important to seek competent legal and tax advice from professionals before acting on anything written in this article.  Abby Law Offices Inc. is a law office that handles estate planning law in Claremore, Oklahoma.

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