Q. Are accounts payable on death and death transfer accounts permitted in New Jersey?
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A. The simple answer is yes.
Payable-on-Death (POD) and Transfer-on-Death (TOD) accounts are available in New Jersey.
Both types of accounts allow you to name one or more beneficiaries of the account in the event of death, said Gene McGovern, certified financial planner at McGovern Financial Advisors in Westfield.
A POD designation is used for bank accounts such as a savings account or certificate of deposit, he said, while a TOD designation is used for brokerage accounts that hold securities, such as stocks, bonds or mutual funds.
Assets in a POD or TOD account pass by law outside of probate, directly to the beneficiary or beneficiaries upon the death of the owner, McGovern said. They are not part of the estate of the deceased and are not subject to the terms of the will.
“To receive proceeds from the POD or TOD account, an individual beneficiary generally only needs to present identification to the institution, along with a certified copy of the death certificate,” he said. declared. “In New Jersey, a completed Form L-8 or other form of estate tax exemption may also be required to clear the account.”
During the lifetime of the account owner, the account belongs solely to the owner or co-owners, McGovern said. The beneficiary of the POD or TOD has no rights in the account before the death of the last holder. In addition, the owner can change the beneficiary at any time, withdraw all the money or close the account. Both POD and TOD accounts have advantages and disadvantages.
“On the plus side, they are an easy way to transfer assets directly to intended beneficiaries, bypassing the probate process. It should be noted, however, that New Jersey probate is relatively simple and inexpensive,” McGovern said.
There is no limit to the size of a POD or TOD account, and a single account can have multiple beneficiaries, he said. These beneficiaries can be any living person, as well as a trust, corporation or non-profit organization.
On the other side of the ledger, if the deceased’s estate does not have enough remaining assets to pay its debts, administrative expenses, or taxes, the assets transferred by the POD or TOD accounts can be used to pay those expenses, McGovern said.
“Another potential downside is that you can’t name an alternate or contingent beneficiary for a POD or TOD account,” he said. “If your beneficiary predeceases you, you will need to name a new beneficiary or the money in the account will become part of the probate estate.”
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Karin Price Mueller writes the Bamboos column for NJ Advance Media and is the founder of NJMoneyHelp.com. Follow NJMoneyHelp on Twitter @NJMoneyHelp. To find NJMoneyHelp on Facebook. Register for NJMoneyHelp.comit is weekly e-newsletter.