Can I use a Transfer on Death status for these accounts?


Q. Is a Transfer on Death (TOD) registration allowed in New Jersey for Certificates of Deposit and investment accounts, and what procedure would be needed for each? I have read your article on how to access money after someone dies,  but I am confused as to whether the TOD may be used for Certificates of Deposit and investment accounts.
— Confused

A. We’re happy to try to clarify for you.

Transfer on Death designations can be made on CDs and investment accounts.

Perhaps your confusion was about “sealing” or “freezing” the account, said Yale Hauptman, an estate planning attorney with Hauptman and Hauptman in Livingston.

“Accounts that are probate assets – in the decedent’s name alone with no co-owner TOD designation – are frozen until the will is probated,” Hauptman said. “Once the executor is appointed, he/she can open an estate account and access the frozen account.”

That can happen within two weeks of death if the will is probated immediately so access for funeral expenses can happen quickly, he said. The executor can pay the funeral via credit card and then quickly get appointed executor and access funds before it comes time to pay the credit card bill.

Part of the account can be frozen for a longer period, however, because of the tax waiver system we have in New Jersey, Hauptman said.

“One-half of the account is frozen by law until the state issues a tax waiver releasing its lien that by law it places on accounts with New Jersey financial institutions and on New Jersey real estate,” he said. “The waiver is obtained by either filing a tax return and paying the tax if any or in some cases a form of affidavit can be completed and submitted to the financial institution and the entire account will be immediately released to the executor.”

This tax waiver system applies to TOD accounts as well, but not to trust accounts, Hauptman said.

“So to be clear, making a CD a TOD account does not avoid the tax waiver system so that half of the account could still be frozen,” he said.

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