A TOD account lets you name someone to inherit your money without probate
A Transfer on Death (TOD) account is a bank or brokerage account with a named beneficiary who automatically receives the money when you die. The account works like a regular checking or savings account during your lifetime — you control it completely, withdraw from it, and earn interest on it. When you pass away, the money bypasses probate court and goes directly to the person you named, usually within days or weeks.
TOD accounts are also called payable-on-death (POD) accounts. They exist at banks, credit unions, and investment firms. The key difference from a joint account is that the beneficiary has no access or ownership rights while you are alive — they cannot withdraw money, see the balance, or make decisions about the account. Only after your death does the account transfer to them.
Key Takeaways
- You keep full control of a TOD account during your lifetime and can change or remove the beneficiary at any time without their knowledge or consent.
- The money in a TOD account avoids probate and transfers directly to your named beneficiary when you die, usually within one to three weeks.
- A TOD account is different from a joint account because the beneficiary has no access to the money or account information while you are alive.
- You can name one person or multiple people as beneficiaries, and you can specify what percentage each person receives.
- TOD accounts do not reduce estate taxes or protect money from creditors, and the account still counts as part of your estate for tax purposes.
How a TOD account works during your lifetime
While you are alive, a TOD account functions exactly like any other bank account. You deposit money, write checks, use a debit card, set up automatic payments, and earn interest. The bank does not restrict your access or require permission from the beneficiary to use your own money. You can close the account, move the money to a different bank, or change the beneficiary whenever you want.
The beneficiary designation is a separate form you complete when you open the account or add to an existing account. You can update it by visiting the bank in person, calling, or using online banking — the process is usually straightforward and free. Some banks let you name a primary beneficiary and one or more backup beneficiaries in case the first person dies before you do.
What happens to a TOD account after you die
When you die, your family or executor notifies the bank and provides a death certificate. The bank verifies the beneficiary information on file and transfers the account balance directly to that person. This process typically takes one to three weeks, depending on the bank's procedures and whether the death certificate needs to be certified or notarized.
The beneficiary does not need a court order or probate judgment to receive the money. This is the main advantage of a TOD account — it saves time and money compared to having the account go through probate, where a judge oversees the distribution and the process can take months or years. The beneficiary receives the full account balance, including any interest earned up to the date of death.
TOD accounts versus joint accounts
A joint account and a TOD account both avoid probate, but they work very differently. In a joint account, both owners have equal access and control during your lifetime — either person can withdraw all the money without permission from the other. In a TOD account, only you can access the money while you are alive. The beneficiary has no rights to the account until you die.
Joint accounts also carry risk: if the other owner faces a lawsuit, tax lien, or creditor claim, the entire account balance may be at risk. A TOD account protects the money from the beneficiary's creditors while you are alive, because the beneficiary does not legally own the account yet. However, once the money transfers to the beneficiary after your death, it becomes their property and is subject to their debts.
Naming multiple beneficiaries on a TOD account
Most banks allow you to name more than one beneficiary on a TOD account. You can specify what percentage each person receives — for example, 50% to your daughter and 50% to your son. If you name multiple beneficiaries and do not specify percentages, most banks divide the account equally among them.
You can also name contingent or backup beneficiaries. If your primary beneficiary dies before you do, the money goes to the contingent beneficiary instead. This prevents the account from going through probate if your first choice is no longer alive. Review your beneficiary designations every few years, especially after major life changes like marriage, divorce, or the birth of children.
Tax and creditor considerations for TOD accounts
A TOD account does not reduce your estate taxes. The account balance still counts as part of your taxable estate for federal and state tax purposes, even though it bypasses probate. If your total estate is large enough to owe estate taxes, the TOD account will be included in that calculation.
While you are alive, a TOD account is protected from the beneficiary's creditors because the beneficiary does not own it yet. However, the account is not protected from your own creditors. If you owe money to creditors, they may be able to claim the account balance through a judgment or lien. After you die, the money becomes the beneficiary's property and is subject to their debts and legal claims.
How to set up or change a TOD account
To set up a TOD account, visit your bank or brokerage and ask about payable-on-death options. Not all institutions offer them — some banks use different names or have specific rules about which account types can have a TOD designation. You will need to provide the beneficiary's full legal name and Social Security number or tax ID.
To change a beneficiary, contact the bank directly. You do not need the beneficiary's permission, and you do not need to notify them of the change. Keep a copy of the beneficiary designation form for your records. If you move accounts or switch banks, ask whether your TOD designation transfers automatically or whether you need to set it up again at the new institution.
Frequently Asked Questions
Can the beneficiary access my TOD account before I die?
No. The beneficiary has no access, ownership rights, or even the right to know the account exists or what balance it holds. Only you can use the account while you are alive. The beneficiary gains access only after you die and the bank processes the transfer.
What if I change my mind about who the beneficiary is?
You can change the beneficiary at any time by contacting the bank and completing a new beneficiary designation form. You do not need permission from the current beneficiary, and you do not have to tell them you made the change. The new beneficiary designation takes effect when ready.
Does a TOD account avoid probate?
Yes. The money transfers directly to the beneficiary based on the bank's records, without going through probate court. This saves time and money compared to having the account distributed through a will or the probate process.
What happens if the beneficiary dies before I do?
If you named a contingent or backup beneficiary, the money goes to that person. If you did not name a backup beneficiary, the account becomes part of your estate and is distributed according to your will or state law. Update your beneficiary designation if your primary choice passes away.
Is a TOD account the same as a trust?
No. A TOD account is simpler and requires no legal document — just a form at the bank. A trust is a legal arrangement that can control how money is distributed and managed after you die. A trust offers more control but costs more to set up and maintain.