What is a transfer on death (TOD) account, and how does it work?

1 min read by Unbiased team Last updated June 28, 2024

Discover what a transfer on death (TOD) deed is and how it can be used to manage your assets and belongings after death.


  • TOD stands for transfer on death and can also be referred to as a “payable on death” (POD). 

  • TODs are a type of legal deed that transfers a person’s assets to named beneficiaries in the event of death. 

  • There are benefits and downsides to transfer on death deeds, which you need to consider for estate planning. 

What is a transfer on death (TOD) account? 

A transfer on death (TOD) account is an official deed that transfers assets held within a bank or brokerage account to named beneficiaries upon the original owner’s death.  

Transfer on death deeds are also known in the financial services industry as “payable on death” (POD), and they fulfill the same purpose as a TOD. 

The types of assets that are typically included in TOD agreements are brokerage accounts, stocks, and bonds.  

Transfer on death accounts bypass probate, a time-consuming legal process for settling the deceased’s estate.  

What are the benefits of using a TOD in estate planning? 

There are several key benefits to TOD agreements.  

The biggest benefit is that they allow you to bypass probate, which can be a tedious paperwork process.  

Normally, a probate is necessary to divide and transfer assets to beneficiaries. With a transfer on death, it is no longer needed, allowing for a smoother and simpler asset management process after death.  

Another benefit of using a transfer on death account is that the owner maintains more privacy.  

All in all, TOD deeds can be an effective tool for ensuring that assets are distributed quickly and according to the owner’s wishes. 

What are the differences between a TOD account and a will? 

TOD accounts, and wills play different roles in the estate planning process.  

A will is a legal document that outlines your wishes regarding personal asset management, property, and care for minor children, if there are any. It may also explain your final wishes for anything related to burials or cremation and include bequests that may not have financial value.  

In contrast, a transfer on death account is a legal deed that permits the direct and automatic transfer of assets to named beneficiaries in the event of death.  

What considerations should be made when choosing beneficiaries? 

Selecting beneficiaries for TOD agreements is an important process that should not be taken lightly.  

The person or people you list as your beneficiary will automatically receive all of the assets in your account, so they need to be someone you trust professionally and personally.  

Additionally, some potential complications may arise when beneficiaries are minors or have special needs. In instances like this, outlining the specifics of how your assets should be managed can be incorporated into a will for added clarity.  

A trusted financial advisor can help you name primary and contingent beneficiaries for your transfer on death account.  

What are the limitations and risks associated with TOD agreements? 

As advantageous as transfer on death agreements can be, they are not without limitations.  

Some of the problems with transfer on death agreements include their potential lack of alignment with government benefits and their inability to provide detailed instructions for asset distribution as a will or trust can.  

TODs also leave room for disputes among beneficiaries and issues with outdated beneficiary designations.  

If the assets mentioned in the transfer on death deed come into conflict with the deceased’s will, it can cause conflict within the beneficiary network.  

Overall, though, TODs supersede wills. If you arrange a TOD to manage the efficient distribution of your assets, the beneficiaries named in the deed will overpower the beneficiaries you name in your will.  

Talking to a financial advisor is the best way to avoid mistakes in this area.  

What are the legal considerations and state laws for TOD agreements? 

There are many legal considerations associated with TOD agreements, including how state laws may impact their effectiveness and applicability.  

Transfer on death accounts do not provide tax benefits, nor can they protect you from estate or inheritance taxes. If you have an outstanding tax bill to pay after your death, it will have to be dealt with by your beneficiaries and your estate planner.  

One way to avoid complications and conflicts with the will is to consult a financial advisor or estate planning attorney to navigate state-specific regulations and ensure legal compliance at every point in the process.  

Get expert financial advice 

Transfer on death deeds are legal arrangements that order the direct transfer of assets in the event of their owner’s passing. TODs can be an effective way to manage your assets after death, but other details should always be outlined in a clear will. 

To learn more about TOD accounts, get matched with a financial advisor at Unbiased for expert financial and estate planning advice.  


Unbiased team

Our team of writers, who have decades of experience writing about personal finance, including investing and retirement, are here to help you find out what you must know about life’s biggest financial decisions.