Transfer on Death

A TOD or POD designation works by registering the account itself in "beneficiary form," a special title that names who takes ownership automatically when the owner dies. That registration, not a will, is what controls where the assets go.

Think of it this way: A TOD or POD designation is like a sticky note on your account that says "give this to [name] when I die." It bypasses probate, so the assets go straight to the named person.

What Is Transfer on Death (TOD)?

• Purpose: Transfer securities directly to named beneficiaries at death
• Probate: Avoided; assets transfer directly to the named beneficiary
• Available for: Sole-owner accounts and jointly owned accounts held with right of survivorship (JTWROS, tenants by the entirety, or community property held in survivorship form). Not available for Tenants in Common (TIC) accounts. The Uniform TOD Security Registration Act excludes TIC from beneficiary-form registration
• Multiple and contingent beneficiaries: The Uniform TOD Security Registration Act lets an owner name more than one primary beneficiary and specify unequal shares (for example, 20% to one beneficiary and 80% to another) instead of splitting the assets equally. The owner may also name a contingent (substitute) beneficiary who takes only if the primary beneficiary does not survive the owner. A beneficiary does not need to be a family member; the Act allows any person or entity, including a trust, charity, or business, to be named
• Revocable: Yes; the sole owner, or all then-surviving owners on a jointly held account, can change or revoke the designation at any time. One owner on a joint account cannot revoke or change the beneficiary alone
• No effect during lifetime: Beneficiary has no rights to the account while the owner is alive
• Does not affect ownership during lifetime: The owner can buy, sell, and withdraw freely
• Overrides a will: TOD designation takes priority over any contrary instructions in a will
• No estate tax benefit: The assets pass outside probate but remain part of the owner's taxable estate

Exam Tip: Gotchas

• TOD overrides a will. If a will says "leave my brokerage to my sister" but the TOD names a brother, the brother receives the assets. The TOD designation controls.
• Beneficiary designations take precedence over testamentary documents. TOD/POD designations override a will.
• The designation stays as written until changed. Under the Uniform TOD Security Registration Act, a TOD/POD beneficiary designation remains in effect until the owner (or, on a joint account, all surviving owners) cancels or changes it. Divorce, remarriage, or estrangement does not automatically update it in every state, so advisers should prompt clients to review beneficiary designations after major life events.

What Is Pay on Death (POD)?

• Conventionally used for bank accounts: In practice, POD designates beneficiaries on bank accounts (checking, savings, CDs), while TOD designates beneficiaries on brokerage and securities accounts. This split is industry convention, not a statutory divide: the Uniform TOD Security Registration Act itself authorizes "POD" as an alternate label for a securities beneficiary-form registration
• Same probate avoidance: Assets pass directly to the named beneficiary
• Revocable: Yes, by the sole owner or all then-surviving owners

Exam Tip: Gotchas

• "POD" is not exclusively a bank-account term. The exam usually pairs POD with bank accounts and TOD with securities, but the Uniform TOD Security Registration Act itself lists "POD" as an authorized label a registering entity can use for a securities beneficiary-form registration. Do not assume a "POD" designation must be a bank account on a question that describes a brokerage or securities account.

How Do TOD and POD Compare?

What Should You Check on Exam Day?

• Distinguish TOD (brokerage/securities) from POD (bank accounts) as the conventional split; both work the same way and both avoid probate. The Uniform TOD Security Registration Act itself also allows "POD" as an alternate label for a securities registration.
• Remember a TOD/POD beneficiary has no rights to the account while the owner is alive, and the sole owner (or all surviving owners on a joint account) can change or revoke the designation at any time.
• Remember TOD/POD designations override a will.
• Remember TOD/POD is available for sole owners and joint owners with right of survivorship (JTWROS, tenants by the entirety, or community property with survivorship), but NOT for tenants in common (TIC).
• Remember a TOD/POD designation stays exactly as written until the owner affirmatively changes it; it does not update itself after a divorce, remarriage, or estrangement in every state.
• Remember a TOD/POD account provides no estate tax benefit; the assets pass outside probate but remain part of the owner's taxable estate.