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Cash & Bank Accounts

Cash can be easier to divide among your beneficiaries than other types of assets, but minimizing the tax impact on it may require careful planning.

Cash is one of the easiest assets to consider when it comes to estate planning, because it is liquid and flexible. It can be divided easily and, without considering inflation, its value is straightforward.

Do cash and bank accounts pass through probate?

YES, cash, as well as bank accounts that don’t allow for TOD designation, must pass through probate.

NO, if there is a TOD designation allowed on a bank account and it is up to date, the account will pass outside of probate. Money placed in a trust is also usually able to pass outside of probate.

Cash is considered part of your taxable estate and will be subject to federal and, if applicable, state inheritance taxes and probate. Some bank accounts have a transfer on death (TOD) designation, which allows you to name a beneficiary and avoid probate.

If your taxable estate is under a certain limit, it may be exempt from federal estate tax. For the latest on the federal exemption, see Estate and gift tax changes in Fidelity Viewpoints®.

Consider a trust for cash assets

A trust can be an effective option for leaving cash to your beneficiaries. A properly structured trust can allow the money to remain outside of probate. If you opt for an irrevocable trust, you may be able to remove the assets from your taxable estate, as well.

For more on trusts, see Six reasons you should consider a trust in Fidelity Viewpoints®.

There may be other solutions for your estate and your particular circumstances for minimizing the tax impact when passing on cash; it’s advisable to consult with your attorney or tax advisor.

Next step

Reviewing & updating your estate plan
Keeping your estate plan up to date is just as important as creating it.

Focus is on tooltip

transfer on death (TOD)

a provision of a brokerage account that allows the account’s assets to pass directly to an intended beneficiary; the equivalent of a beneficiary designation

Questions?

The tax information and estate planning information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal or tax advice. Fidelity does not provide legal or tax advice. Fidelity cannot guarantee that such information is accurate, complete, or timely. Laws of a particular state or laws which may be applicable to a particular situation may have an impact on the applicability, accuracy, or completeness of such information. Federal and state laws and regulations are complex and are subject to change. Changes in such laws and regulations may have a material impact on pre- and/or after-tax investment results. Fidelity makes no warranties with regard to such information or results obtained by its use. Fidelity disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information. Always consult an attorney or tax professional regarding your specific legal or tax situation.

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