Transfer-on-death and payable-on-death accounts

Also called TOD, POD, Totten trust

Registrations that pass a bank account, investment account or, in some states, real estate directly to a named person at the owner’s death, skipping probate.

What it means

A payable-on-death (POD) designation is added to bank accounts and CDs, and a transfer-on-death (TOD) registration is added to brokerage accounts and securities. The owner keeps full control during life and can spend the money, change the beneficiary or close the account. The beneficiary has no rights until the owner dies, then claims the asset by presenting a death certificate and identification.

Many but not all states also allow transfer-on-death deeds for real estate, and some allow TOD titles for vehicles. These tools offer much of the probate-avoidance benefit of a trust for specific assets at little or no cost. They do not name backup decision-makers for incapacity, and as with any beneficiary form, they generally override a will.

Example

For example, a widower adds his son as POD beneficiary on a $40,000 savings account and his daughter as TOD beneficiary on a $40,000 brokerage account. At his death, each child claims their account directly with the institution, without waiting for probate.

How it’s used

Passing bank and investment accounts without probate
Leaving a home through a TOD deed where state law allows
Simple estate plans that do not need a trust

Strengths and weaknesses

Strengths

Usually free and easy to set up
Owner keeps full control and can change it any time
Assets generally skip probate

Weaknesses

Does not help manage assets if the owner becomes incapacitated
Can unintentionally unbalance an estate plan or override a will
Real estate TOD deeds are not available in every state

Good to know

Whether TOD deeds are allowed and how they must be recorded depends on state law, so many owners check with an estate attorney first.

Educational information only, not financial, tax or legal advice. Rules, limits and rates change; check the IRS, your lender or plan, or a qualified professional before acting.