TOD is a way to pass money to someone after you die without going through probate
TOD stands for "Transfer on Death." It is a designation you can add to a bank account, brokerage account, or investment account that automatically moves the money to a named person when you die. The account holder keeps full control while alive. The money does not go through probate court, and the named person receives it quickly after your death.
TOD is different from making someone a joint owner or adding them as a beneficiary on a will. With TOD, the transfer happens outside the will process entirely. The bank or brokerage handles the paperwork directly with the person you named.
Key Takeaways
- TOD accounts transfer money directly to the person you name, bypassing probate court and the delays that come with it.
- You keep complete control of the account while you are alive and can change or remove the TOD designation at any time.
- The named person has no access to the money or account information until after you die.
- Not all banks and account types offer TOD, so you need to ask your bank or brokerage whether it is available for your specific account.
- TOD is available in most states but not all, and the rules vary slightly by state.
How TOD works while you are alive
While you own the account, nothing changes. You can deposit money, withdraw money, earn interest, and manage the account exactly as you always have. The person you named as TOD beneficiary cannot touch the account, see the balance, or make any decisions about it. They simply know they are listed.
You can change your mind at any time. If you want to name a different person, remove the TOD designation entirely, or add multiple beneficiaries, you can do that by contacting your bank or brokerage and filling out a new form. There is no penalty for changing it.
What happens to the money after you die
When you die, the person you named (called the TOD beneficiary) contacts the bank or brokerage with a copy of your death certificate. The bank verifies your death and transfers the account balance to the beneficiary. This usually takes a few days to a few weeks, depending on the bank.
The money does not sit in probate. It does not go through your will. The beneficiary does not have to wait for a court to approve the transfer or for your estate to be settled. This is the main advantage of TOD: speed and simplicity.
TOD versus joint ownership and beneficiary designations
A joint account means two people own the account right now. Both can withdraw money, both can see the balance, and both have equal rights. If one person dies, the other automatically owns the whole account. This is different from TOD because the other person has access while you are alive.
A beneficiary designation on a life insurance policy or retirement account (like an IRA or 401k) works similarly to TOD — the money goes to the named person outside of probate. However, retirement accounts and insurance have their own rules and tax treatment. TOD is simpler and is used for regular bank and brokerage accounts.
A will is a legal document that says who gets your money after you die. Money left through a will goes through probate court, which can take months or years. TOD bypasses this entirely.
Which accounts can have TOD designations
Most banks and brokerages allow TOD on checking accounts, savings accounts, and money market accounts. Many also allow it on brokerage accounts that hold stocks and bonds. However, not every institution offers it, and some accounts may not be may be able to access.
Retirement accounts like IRAs and 401(k)s do not use TOD. They have their own beneficiary designation process. Certificates of Deposit (CDs) may or may not allow TOD depending on your bank. Ask your bank or brokerage directly whether TOD is available for the specific account you want to set up.
State rules and availability
TOD is available in most states, but not all. Some states do not recognize TOD for bank accounts, though they may allow it for brokerage accounts. A few states have different names for the same concept — for example, some call it "Payable on Death" (POD) instead of TOD.
The rules also vary slightly by state. Some states limit how many beneficiaries you can name, or require specific language on the form. When you set up TOD, the bank will use the form required by your state. If you move to a different state, check with your new bank about whether your existing TOD designation is still valid.
How to set up a TOD designation
Contact your bank or brokerage and ask whether they offer TOD. If they do, ask for the TOD form or Payable on Death form. You will need to provide the full name and Social Security number (or tax ID) of the person you want to name as beneficiary.
Fill out the form, sign it, and return it to the bank. Some banks let you do this online, by mail, or in person. Keep a copy for your records. There is no cost to set up TOD. Once it is in place, you do not need to do anything else unless you want to change it.
Frequently Asked Questions
Can I name more than one person as a TOD beneficiary?
Many banks allow you to name multiple beneficiaries and specify how much each person gets. Some banks split the account equally among all named beneficiaries. Ask your bank what options they offer before you fill out the form.
What if the person I named dies before I do?
The money goes to your estate and is handled through your will or state law. This is why some people name a backup beneficiary. Ask your bank whether they allow you to name a second choice in case the first beneficiary dies before you.
Does TOD affect my taxes or the beneficiary's taxes?
TOD does not create a tax event for you while you are alive. When you die, the beneficiary receives the money at its current value with no federal income tax owed on it. Some states may have inheritance taxes that apply, depending on where you live and who the beneficiary is.
Can my creditors or the IRS take money from a TOD account?
Before the money reaches the beneficiary, creditors and the IRS can make claims against your estate. If you have significant debts or tax obligations, the bank may hold the funds while these are resolved. Once the beneficiary receives the money, it is generally protected from your creditors.
Can I remove someone as a TOD beneficiary?
Yes. Contact your bank, ask for a new TOD form, and either name a different person or remove the designation entirely. You have full control over this while you are alive. The change takes effect once the bank processes the new form.