Transfer on Death (TOD) Accounts

Transfer on death (TOD) accounts are an alternative to a will for transferring assets like cash and securities. They are relatively easy to establish, and can be updated free of charge at virtually any financial institution.

The TOD designation supersedes any contrary provision in a will, and when the account owner dies, the beneficiaries inherit the account without going through probate.

TOD accounts are a convenient way to distribute assets, and can be particularly helpful for individuals who are not in a stable financial position at the time of their deaths. It may also help to minimize estate tax liability and allow for the use of credit shelter trusts, generation skipping trusts, and other estate planning strategies.

To set up a TOD account, simply complete the form provided by your bank or brokerage firm. The form explains how the account will work, what types of funds can be held, and who will receive distributions in the event of your death.

It is important to update your beneficiary designations on TOD and POD accounts periodically, especially if you change your estate plan or become incapacitated. Changing your beneficiaries can have a significant impact on your final distributions, so you must take the time to ensure that they reflect your current wishes.

If you are considering using TOD accounts to distribute assets, you should speak with an estate planning attorney. There are numerous factors that can affect the effectiveness of TOD accounts, including your state's laws regarding asset titling and inheritance taxes.