An investor opens an individual brokerage account with a Transfer on Death (TOD) designation, naming their adult daughter as the sole beneficiary. Which of the following statements regarding the legal and operational characteristics of this TOD account structure are CORRECT?
- Upon the account owner's death, the account assets pass directly to the named beneficiary without going through estate probate.Answer
- During the account owner's lifetime, the designated beneficiary holds no ownership rights or trading authority over the account assets.Answer
- CIf the account owner becomes medically incapacitated, the TOD beneficiary automatically receives discretionary trading authority over the account.
- DAssets transferred via a TOD registration are completely exempt from federal estate tax obligations.
Answer
The correct statements are that account assets transfer directly to the beneficiary outside of probate upon the owner's death, and that the beneficiary holds no ownership or trading rights during the owner's lifetime.
Transfer on Death (TOD) registrations allow individual accounts to transfer ownership directly to designated beneficiaries upon death, bypassing probate while leaving the owner with 100% control and ownership during their lifetime.
Step-by-Step Solution
Key Concept
Transfer on Death (TOD) Account Features and Limitations
Estimated Time:1m 30s