TOD and POD Accounts (Transfer on Death / Payable on Death)

Transfer on Death (TOD) and Payable on Death (POD) are beneficiary designations that can be added to financial accounts to direct the transfer of assets at death without the need for probate. POD is the term typically used for bank accounts (checking, savings, CDs, money market accounts), while TOD is used for brokerage and investment accounts. The function is the same: upon the owner's death, the assets pass directly to the named beneficiary.

Setting up a TOD or POD designation is usually straightforward and can be done through the financial institution that holds the account. You can name one or multiple beneficiaries and specify the percentage each should receive. Many institutions also allow you to name contingent beneficiaries who would receive the assets if the primary beneficiary has predeceased you.

Like other beneficiary designations, TOD and POD designations override instructions in a will. If your will states that your brokerage account should go to your sister but the TOD designation names your nephew, your nephew will receive the account. This is why it is essential to keep these designations current, particularly after major life events like marriage, divorce, the birth of a child, or the death of a named beneficiary.

In Pennsylvania, the Real Estate Transfer on Death (TOD) Act allows property owners to record a TOD deed that transfers real estate to a named beneficiary at death, bypassing probate for that property. This can be a useful tool for homeowners who want to simplify the transfer of their primary residence or other real property. However, the deed must be properly recorded during the owner's lifetime to be effective.

While TOD and POD designations are valuable probate-avoidance tools, they do not address what happens if the account owner becomes incapacitated. For that, a durable power of attorney is needed. TOD and POD designations work best as part of a coordinated estate plan that includes appropriate legal documents, beneficiary designations on all relevant accounts, and regular reviews to ensure everything remains aligned with your wishes.