A TOD account lets you name someone to inherit your money without probate
A Transfer on Death (TOD) account is a bank or brokerage account that automatically passes to a person you name when you die. The account works like a regular checking or savings account during your lifetime—you control the money, earn interest, and make withdrawals. When you pass away, the funds skip probate court and go directly to your named beneficiary, usually within days or weeks.
TOD accounts are also called "payable on death" (POD) accounts. They exist at banks, credit unions, and investment firms. The key difference from a joint account is that your beneficiary has no access to the money while you're alive—they only inherit it after you die. You can change or remove the beneficiary at any time, and you can name multiple people to split the account.
Not every state allows TOD accounts for all account types. Most states permit them for savings and checking accounts. Some states extend TOD to investment accounts, money market accounts, and certificates of deposit (CDs). Check with your bank or your state's laws to confirm what's available where you bank.
Key Takeaways
- A TOD account passes money directly to your named beneficiary after you die, without going through probate court.
- You keep full control of the account during your lifetime—the beneficiary cannot access or withdraw money while you're alive.
- You can change the beneficiary at any time and name multiple people to split the account.
- TOD accounts are free to set up and available at most banks, credit unions, and brokerages, though not all states allow them for every account type.
- The money reaches your beneficiary much faster than it would through a will, often within weeks instead of months.
How a TOD account differs from a joint account
A joint account gives both owners access to the money right now. Either person can withdraw, spend, or close the account. A TOD account gives access only to you. Your beneficiary is named on the account but cannot touch the money until you die.
With a joint account, if the other owner dies first, the surviving owner usually keeps the money automatically (depending on how the account is titled). With a TOD account, if your beneficiary dies before you do, the money stays in your account and you can name a new beneficiary. You control what happens next.
Joint accounts also create tax and creditor complications that TOD accounts avoid. If you add someone to a joint account, you may trigger a gift tax report, and creditors of either owner can sometimes reach the joint funds. A TOD beneficiary has no claim on the account until after your death, so creditors cannot touch it through them.
Setting up a TOD account at your bank
To create a TOD account, contact your bank or credit union and ask whether they offer payable-on-death or transfer-on-death accounts. If they do, you can usually set it up in person, by phone, or online. You'll need to provide your beneficiary's full legal name and Social Security number (or tax ID).
Some banks add the TOD feature to an existing account—you don't have to open a new one. Others require you to open a new account with the TOD designation. Ask which applies to you. There is no fee to add a beneficiary or to maintain a TOD account.
Keep a copy of the beneficiary form you sign. When you die, your beneficiary will need to show the bank a death certificate and proof of identity to claim the money. Having the form on file makes the process faster and clearer.
What happens to the money after you die
When you pass away, your beneficiary contacts the bank with a death certificate and a government-issued ID. The bank verifies the information and transfers the account balance to your beneficiary. This usually takes one to three weeks, though some banks move faster.
The money is not subject to probate, which means it does not go through court and does not have to wait for a judge to approve the transfer. It also does not go through your estate, so it is not available to pay your debts or taxes (with some exceptions for federal estate taxes in very large estates).
If you name multiple beneficiaries, the account splits according to the percentages you specify. If you name one person and do not specify a percentage, that person gets the entire balance. If your beneficiary dies before you do and you have not named an alternate, the money goes into your estate and is distributed according to your will or your state's intestacy laws.
Changing or removing a beneficiary
You can change your TOD beneficiary at any time while you're alive. Contact your bank and ask for a new beneficiary form. Fill it out, sign it, and return it to the bank. The new beneficiary designation replaces the old one. Keep a copy for your records.
If you want to remove a beneficiary without naming someone new, ask the bank whether that's possible. Some banks require you to name at least one beneficiary; others let you leave the account with no TOD designation. If you remove the beneficiary, the money will go into your estate when you die.
Life changes—divorce, estrangement, a new child—often prompt beneficiary changes. Review your TOD designations every few years or whenever your circumstances shift. A beneficiary form is simple to update and takes only minutes.
State rules and account limits
TOD accounts are legal in all 50 states, but the rules vary. Some states allow TOD for any bank account; others limit it to savings and checking. A few states permit TOD for investment accounts and CDs. Your bank can tell you what your state allows.
Most states do not cap how much money you can hold in a TOD account. However, if your total estate is very large, federal estate taxes may apply when you die, and the TOD account will be included in that calculation. This is rare and affects only estates worth millions of dollars. For most people, there is no tax consequence to using a TOD account.
Some states have specific forms or language required for a TOD account to be valid. Your bank will use the correct form for your state, so you do not have to worry about this yourself. Just make sure you sign and date the form and keep a copy.
When a TOD account makes sense
A TOD account is useful if you want to leave money to one or more specific people without the delay and cost of probate. It works well for straightforward situations: a parent leaving money to adult children, a spouse leaving an account to their partner, or someone leaving savings to a trusted friend.
TOD accounts are less useful if your finances are complicated—for example, if you have a will that contradicts the TOD designation, or if you owe significant debts. In those cases, probate may be necessary anyway, and a TOD account can create confusion. If you have a complex estate, talk to an attorney before setting up TOD accounts.
TOD accounts also do not replace a will. You still need a will to name a guardian for minor children, to leave property that is not in a TOD account, and to name an executor to handle your estate. A TOD account is one tool among several for passing money to the people you choose.
Frequently Asked Questions
Can my beneficiary access the money before I die?
No. Your beneficiary has no legal right to the money while you're alive. They cannot withdraw, borrow against, or claim any part of the account. Only you can access it. The beneficiary designation takes effect only after you die.
What if I die without naming a beneficiary?
The money stays in your account and becomes part of your estate. It will be distributed according to your will, or if you have no will, according to your state's intestacy laws. This process goes through probate court and takes longer than a TOD transfer.
Can I name a minor as my TOD beneficiary?
Yes, but the money cannot be given directly to a minor. When you die, the bank will hold the funds until a court appoints a guardian or conservator to manage the money on the child's behalf. You can avoid this delay by naming an adult trustee in your will to manage the money for the child.
Does a TOD account affect my credit or taxes while I'm alive?
No. A TOD account is a regular bank account. It does not affect your credit score, and you report interest earned on your tax return as you normally would. The TOD designation itself has no tax consequence until after you die.
What if I move to a different state?
Your TOD account remains valid. However, check whether your new state has different rules about TOD accounts. If your bank operates in both states, they can usually update your account to comply with your new state's laws. If you switch banks, you can set up a new TOD account at the new bank.