Transfer on Death (TOD)

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Transfer on Death (TOD)

A transfer on death (TOD) is a legal designation that lets you name one or more beneficiaries to receive specified assets automatically when you die. Unlike a will, assets with TOD designations generally bypass probate, making transfers faster, private, and less costly.

How TOD works

  • You name beneficiaries on an account-specific TOD form provided by the financial institution.
  • You retain full control of the assets during your lifetime — you can use the accounts, change beneficiaries, or revoke the designation.
  • After your death, beneficiaries present a death certificate and any required documentation to claim the assets. Because the transfer happens outside probate, distribution is typically quicker.
  • TOD designations do not shield assets from creditors or outstanding debts. Creditors may claim against the estate or the designated assets before beneficiaries receive them.

Assets that can (and cannot) use TOD

  • Commonly used for: bank accounts, brokerage and investment accounts, mutual funds, some securities, and in some states, real estate via transfer-on-death deeds.
  • Not usually needed or available for: retirement accounts (401(k)s, IRAs), life insurance policies, and annuities — these use beneficiary designations handled by the plan or insurer.
  • Rules vary by institution and state, so confirm what assets your financial institutions allow under TOD.

How to set up a TOD

  1. Decide which accounts or assets you want to cover with a TOD.
  2. Request and complete the TOD form from each financial institution (names, contact info, DOB, etc.). Some states or institutions may require notarization.
  3. Name primary and, if desired, contingent beneficiaries and specify their shares.
  4. Submit the form to the institution and confirm it’s been recorded.
  5. Update the designation after major life events (marriage, divorce, birth, death of a beneficiary).

Advantages

  • Avoids probate for designated assets.
  • Faster transfer to beneficiaries.
  • Maintains privacy (no public probate records).
  • Account holder retains control and flexibility during life.
  • Low or no legal costs to establish (cheaper than setting up trusts).

Disadvantages

  • Not suitable for complex estates or arrangements involving multiple jurisdictions.
  • Does not protect assets from creditors or lawsuits.
  • Not all assets can be covered by TOD designations.
  • May create conflicts if beneficiary designations conflict with a will or other estate plan — coordination is required.

Who should consider a TOD

TODs are a good fit if you want a simple, low-cost way to pass straightforward financial accounts to heirs quickly and privately, and you don’t require creditor protection or complex estate planning tools. For complex estates, creditor protection, or tax planning, consult an estate-planning attorney about trusts or other strategies.

Example

Mary has a brokerage account worth $250,000 and names her son James as the TOD beneficiary. She later deposits $20,000 and withdraws $50,000; the account balance when she dies is $220,000. James presents Mary’s death certificate to the brokerage and receives the account assets without probate delays or court involvement.

Bottom line

A transfer on death designation is an efficient, affordable estate-planning tool for transferring certain financial assets directly to beneficiaries without probate. It offers speed, privacy, and flexibility during the account holder’s lifetime but is limited in scope and offers no creditor protection. Review your overall estate plan and the types of assets you hold to determine if TOD designations make sense for your situation.