Transfer on Death accounts, or TODs, are any securities accounts where the owner has designated a beneficiary upon death.
What you need to know
Transfer on Death accounts, or TODs, are any brokerage accounts, securities, or stocks where the owner has designated a beneficiary upon death.
Transfer on Death (TOD) and Payable on Death (POD) accounts are practically the same, except POD accounts are for regular checking and savings accounts, and TOD accounts are often associated with stocks and securities.
While TOD accounts can avoid the trouble of probate and reduce an estate's probate asset value, they can still be subject to estate and inheritance taxes, depending on the details.
TOD accounts are just any investment account that someone has filled out a form in advance that says who give the cash to when they pass away.
All banks and credit unions should provide this option, and all someone has to do is fill out a short form with the details of who they want to inherit the cash. Then at any point during their life they can still change the beneficiary or close the account.
If you are the recipient of a TOD account's funds, you just need to drop by the bank, prove you are who you are, and prove that the person who owned the account has passed away.
You can do this by yourself or with the executor, executrix, or personal representative named in the will (if a will existed). You don't have to involve them, but it can be nice for them to know what happened to that bank account so they aren't wasting time looking for it.
Why are TOD accounts useful?
The advantage of TOD accounts is that the money in the account passes directly to a named beneficiary after the bank confirms the original owner passed. This means the money skips probate, even if the account holder died without a will (intestate).
This means the beneficiaries will get their money/inheritance faster. In most cases, people in advance of their deaths should try to do everything they can to find ways to transfer their money through particular mechanisms that avoid probate. This spares executors time and effort and helps lower the estate's total probate asset value, which can facilitate faster probate.
If you are new to being an executor and still wrapping your head around probate, this guide will give you a good idea of everything you're responsible for: What is Probate? Beginner's Guide and Timeline.
How do I create a TOD account?
Again, it's super simple. Just call or contact your bank to figure out what form you need, fill it out/designate a beneficiary, and you should be all set.
What to do when a loved one dies
When people die, they leave behind a life that must be closed out. Don't tackle it all alone. From planning the funeral to tackling the legal & financial estate, here's an ultimate checklist of all the things an executor needs to do following the loss of a loved one.
Learn moreJulia has a brokerage account at her bank. Years before she passed, she filled out a short form with the credit union to name her daughter, Jackie, as the beneficiary. After Julia passed away, Jackie went to the bank with her ID and a copy of the death certificate, and the money/assets in that account was directly transferred to her without needing to involve the probate court.
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Nathan Phelps
Nathan is a Sr. Content Lead at Atticus and owner of Crafted Copy, a boutique copywriting and marketing shop based out of Nashville, TN. He has written hundreds of articles, white papers, and emails in industries like estate settlement, finance, and psychology, and his writing is read by millions of people across the internet each year.
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