Transfer on Death (TOD)

You add a TOD or POD beneficiary through the bank or brokerage, or, for real estate, by signing and recording a TOD deed in a state that allows one. Nothing changes during your life. The beneficiary has no ownership, can’t withdraw anything and doesn’t need to know about the registration, and you can spend the money, sell the asset or name someone else without their consent.

At your death the beneficiary claims the asset directly, usually with a death certificate and the institution’s forms; real estate generally also needs a document recorded under state law. The asset never enters Probate, so it usually transfers faster and isn’t part of a public court file.

TOD is a close cousin of a beneficiary designation on a retirement account or insurance policy: both are contracts that bypass your Will. On a joint account with a TOD beneficiary, the beneficiary inherits only after the last surviving owner dies. With several beneficiaries, each takes the stated share, and you can list contingent beneficiaries to catch a share that lapses.

State law decides what can carry a TOD beneficiary, and the list keeps growing. Many states have a law, often based on a uniform act, for securities registered in beneficiary form, and many now allow transfer-on-death deeds for real estate, but the rules, names and recording requirements differ, so check your own state before relying on one. Retirement accounts and life insurance use their own beneficiary forms rather than TOD registration. The common uses:

TOD is usually the cheapest way to keep an asset out of probate, but it isn’t the only one, and each alternative gives up something different.

Adding a child as a joint owner with right of survivorship also avoids probate, but it hands them rights today. Their creditors or a divorcing spouse may reach the property, and you may need their signature to sell or borrow against it. It can also count as a gift: putting a child on the title of a house you paid for generally gives them half its value at once, while adding them to a bank account becomes a gift when they withdraw money for their own use.

A revocable living trust avoids probate for everything titled to it and, unlike TOD, names a successor trustee to manage assets if you become incapacitated, but it costs more to set up and each asset must be retitled. A will covers everything, including assets you forget to register, but it works only through probate. Many households combine them: TOD or POD on simple accounts, a will as a safety net, and a power of attorney for incapacity, since a TOD registration does nothing while you are alive.

TOD avoids probate, not taxes. The IRS counts non-probate assets in the gross estate just like probate ones, so TOD accounts and deeds are part of the calculation for the federal estate tax, with its $15,000,000 exclusion per person in 2026, and for any state estate tax.

That inclusion has an upside. Because the asset is in the gross estate, the beneficiary receives a step-up in basis to its value at death, so selling soon afterward usually produces little taxable gain. Giving the same asset away during life would instead pass along your original cost basis, and a large gift would need a gift tax return.

TOD also doesn’t guarantee protection from the owner’s debts. Depending on state law, an executor or creditors may be able to reach TOD assets when the probate estate can’t pay valid debts, taxes and final expenses. And federal Medicaid law lets states widen estate recovery beyond probate to assets passed through survivorship, a living trust or another arrangement, so a TOD deed on a home may not keep it out of a state’s claim for long-term care costs.

TOD’s simplicity is also its weakness. Each registration acts alone, outside your will, so the pieces of a plan can drift apart as balances change, and often no one reviews them until it is too late. Before relying on TOD, look at the plan as a whole: who receives each asset, what those assets may be worth later, and where the cash to settle the estate will come from. These mistakes come up most often.