Skip to content

What About a Transfer on Death Designation for Investment Accounts?

Bigstock-Elder-Couple-With-Bills-3557267There is no end to the ways that people try to come up with ways to transfer their assets. The problem is, even if you technically can try this strategy, it may not work out the way you want.

Accounts that are titled as “transfer on death,” or TOD, means that the beneficiaries of the account receive the assets on the death of the owner. With the use of a TOD, you can also determine how much of each asset you want to go to each beneficiary. The named beneficiaries do not have any access or control of the account, as long as the account owner is living.

However, is a Transfer on Death (TOD) registration allowed for Certificates of Deposit and investment accounts? If so, what’s the process?’s recent article asks, “Does New Jersey allow a "Transfer on Death" registration for these investments?” Apparently, in New Jersey, Transfer on Death designations can be made on CDs and investment accounts.

Sometimes confusion can arise about "sealing" or "freezing" the account.

Accounts that are probate assets—which are those in the decedent's name alone with no co-owner TOD designation—are “frozen” until the will is probated. The beneficiaries can’t access those funds until the probate judge signs off and allows the executor to move forward and disburse the funds. However, when the executor is appointed, he can open an estate account and access the frozen account.

That can happen within two weeks of death if the will is probated immediately. In that case, fund access for funeral expenses can happen right away. The executor will frequently pay the funeral home with a credit card and then get appointed executor and access funds, before he has to pay the credit card bill.

However, again in New Jersey, some of the account can be frozen for a longer period because of the state’s tax waiver system. Half of the account is frozen by law, until the state issues a tax waiver releasing its lien on accounts with New Jersey financial institutions and on New Jersey real estate.

The waiver is accomplished by filing a tax return and paying the tax (if any), or in some instances, a form of affidavit can be filled out and sent to the financial institution and the entire account will be immediately released to the executor.

The tax waiver system also applies to TOD accounts, but not to trust accounts. So making a CD a TOD account, doesn’t avoid the tax waiver system. Half of that account could still be frozen.

This is not as seamless a process as you may have hoped. A local estate planning attorney will be able to explain how this strategy may or may not work in your state, and explore what can be done to achieve your ultimate estate goals.

Reference: (November 12, 2018) “Does New Jersey allow a "Transfer on Death" registration for these investments?”

Posted in