Quick Answer
TOD applies to brokerage and securities accounts; POD applies to bank accounts. Both let an owner name a beneficiary who receives the assets directly at death, bypassing probate, and both are revocable and override a will. The owner keeps full control and the beneficiary has no rights while the owner is alive.
Transfer-on-death (TOD) and pay-on-death (POD) designations allow account holders to name beneficiaries who receive assets directly at death, bypassing probate.
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: Individual accounts and some joint accounts
- Revocable: Yes (account owner can change or revoke the designation at any time)
- 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.
What Is Pay on Death (POD)?
- Bank equivalent of TOD: Used for bank accounts (checking, savings, CDs)
- Same probate avoidance: Assets pass directly to the named beneficiary
- Revocable: Yes
How Do TOD and POD Compare?
| Feature | TOD | POD |
|---|---|---|
| Account type | Brokerage/securities | Bank accounts |
| Probate | Avoided | Avoided |
| Revocable | Yes | Yes |
| Overrides will | Yes | Yes |
What Should You Check on Exam Day?
- Distinguish TOD (brokerage/securities) from POD (bank accounts); both work the same way and both avoid probate.
- Remember a TOD/POD beneficiary has no rights to the account while the owner is alive, and the owner can change or revoke the designation at any time.
- Remember TOD/POD designations override a will.
- Remember TOD/POD is available for individual accounts and some joint accounts.
- Remember a TOD/POD account provides no estate tax benefit; the assets pass outside probate but remain part of the owner's taxable estate.