Life insurance, IRAs, 401(k) plans and other retirement accounts pass directly to the beneficiaries you designate outside of your will. Brokerage accounts, on the other hand, generally pass to your beneficiaries through your will and must go through probate first, which can be time-consuming, public and expensive in some states.

Kiplinger's recent post entitled, "How Your Brokerage Account Can Bypass Probate" says that a transfer on death (TOD) registration is a very wise method of designating beneficiaries for your brokerage account. A transfer on death account, or "TOD" account, is a special type of investment account that is recognized under state law. There are also states that allow transfer on death deeds for real estate. Talk to your estate planning attorney about this for your state.

A TOD lets you keep control over the account, and you are able to change the beneficiary designation any time you'd like.

Another nice thing about a TOD, according to the Kiplinger article, is that it's very explicit as to who inherits the account. It's not lumped in with all of the other assets passed through your will. A TOD can help eliminate disputes among family members—one of the critical rationales for estate planning in the first place—so you'll have peace of mind knowing that you assets will go to the intended individuals.

The article explains that a TOD account permits the assets remaining in the investment account when the account owner dies to pass directly to the beneficiaries named by the account owner. This occurs outside of probate, so there are no court filings or long delays. Typically, the beneficiaries of the TOD account need only show the holder of the investment account (usually a brokerage firm) an original death certificate of the owner. That's all they have to do to gain control of the account.

If you want to divide your estate among more than one beneficiary—like, give a third to each of your three daughters—it may be a good idea to transfer the brokerage account through your will. The issue with using a TOD in this situation is that you could designate one TOD beneficiary of your brokerage account (Sarah), and leave an equal amount of money to the other girls, Kate and Laura. However, if your brokerage account loses money or goes way up in value before you pass away, Sarah could end up inheriting an amount of money very different than the other girls. If you do this through your will, you can divide the total assets in exactly equal portions.

Talk with an experienced estate planning lawyer to find out how to best use a TOD and whether there are other strategies that will work well for your specific situation.

For more information about estate planning, please visit my estate planning website.

Reference: Kiplinger.com (July 12, 2015) "How Your Brokerage Account Can Bypass Probate."