Whether you’ve been designated the beneficiary of a payable-on-death (POD) account or a transfer-on-death (TOD) account, you can generally claim the contents of the account shortly after the account holder’s death — without the account needing to pass through probate first.
That said, key differences exist in how these accounts function, the types of assets they hold and the procedures required to transfer them.
Suppose a decedent established a POD account at a local bank for personal funds and a TOD account at a brokerage firm for stocks. He named his son as the sole POD beneficiary and his daughter as the sole TOD beneficiary.
To claim the POD account, the son must present to the bank a certified copy of the death certificate and valid identification. Because POD accounts allow for direct and automatic transfers to designated beneficiaries, the bank typically will issue a check within days.
Claiming the TOD account, however, may not be as straightforward, since such accounts often require more steps than POD accounts. The daughter must first contact the brokerage firm to report her father’s death. She may then be asked to provide documentation, such as an affidavit of death or other legal forms, to validate the transfer. This process can take several weeks.
If you’re inheriting from a deceased loved one or assisting with estate administration, understanding the distinctions between POD and TOD beneficiary designations is key to avoiding probate-related delays. A probate attorney can help ensure these non-probate assets are properly transferred and provide guidance if complications arise.
What Is a POD Account?
A POD account is a type of bank account that allows the owner to designate a beneficiary who will receive the funds in the account upon their death.
It’s important to understand that not all bank accounts automatically include beneficiary designations. To convert a standard bank account into a POD account, the account holder must complete a beneficiary designation form, referred to as a Totten trust.
Without this formal designation, the account will be considered part of the decedent’s probate estate and cannot be transferred directly to a beneficiary.
What Is a TOD Account?
While a TOD account functions similarly to a POD account, it typically applies to investment accounts rather than bank accounts. TOD designations are commonly used with brokerage accounts, individual stocks, bonds and mutual funds.
POD vs. TOD Accounts: How Do They Compare?
POD and TOD accounts both serve as useful, cost-effective tools for transferring assets to beneficiaries outside of probate. However, they apply to different types of assets and follow distinct legal processes.
Understanding how these common account types compare can help you determine whether the account in question will pass directly to the designated beneficiary — or whether probate may be necessary to complete the transfer.
Key Differences Between POD and TOD Accounts
While POD and TOD accounts function largely the same, there are a couple subtle differences between them to be mindful of.
Types of Assets
The most obvious difference between POD and TOD accounts lies in the types of assets they hold.
POD accounts are typically bank accounts — such as checking accounts, savings accounts or certificates of deposit — that allow the account owner to designate a beneficiary or multiple beneficiaries who will receive the funds upon their death.
TOD accounts, on the other hand, are more commonly associated with investment assets. These might include brokerage accounts, stocks, bonds or mutual funds.
Although both account types allow for funds to be transferred without probate after an account owner’s death, the nature of the account can play a role in how its assets are categorized and handled.
Claims Process
The process for claiming POD and TOD accounts after the account holder’s death differs slightly.
To access a POD account, the named beneficiary typically must present a certified copy of the death certificate along with valid identification. While some banks may require additional paperwork, the claims process is generally straightforward.
In contrast, claiming a TOD account often involves more steps — particularly when the account holds investments that fluctuate in value. Beneficiaries are usually required to submit an affidavit of death, a certified copy of the death certificate and proof of identity. They may also need to work with the brokerage firm to retitle or liquidate the account, which can add complexity.
Because requirements vary by institution, it’s important to contact the financial institution ahead of time to confirm what documentation will be needed to claim your inheritance.
Key Similarities Between POD and TOD Accounts
POD and TOD accounts share more similarities than differences, which is why people often confuse the two.
Revocability
Both POD and TOD designations are revocable during the account owner’s lifetime. This means the owner can change or remove the beneficiary designation at any time without the beneficiary’s consent, so long as they are mentally competent when updating the designation.
No Beneficiary Access Before Death
Neither POD nor TOD beneficiaries have the legal right to access or control an account with a designation while the owner is alive. The account remains entirely under the control of the owner during their lifetime, with the beneficiary’s interest only activating once the owner dies.
Avoidance of Probate
One of the most appealing features of both POD and TOD accounts — and a primary reason many people choose to set them up — is their ability to bypass probate under normal circumstances. Because probate can be costly and time-consuming, often delaying the distribution of assets, many individuals seek to avoid it in order to preserve more of their estate for their beneficiaries and heirs.
As long as no disputes arise, the named beneficiary can typically claim the funds directly from the financial institution without any court involvement. However, probate may become necessary if the designation is challenged.
Common reasons to challenge a designation include allegations of fraud or undue influence, questions about the account holder’s mental capacity when naming the beneficiary, or complications involving a beneficiary who predeceased the owner, was disqualified or disclaimed their inheritance.
For example, if a decedent was pressured by a relative into naming a relative as a beneficiary, and evidence of that elder financial abuse comes to light, the account may be subject to litigation and end up in probate despite the original designation.
Do POD and TOD Accounts Always Avoid Probate?
While POD and TOD accounts are designed to avoid probate, probate avoidance is not guaranteed in every situation. Certain financial, legal or procedural complications can subject these accounts to probate.
Understanding the circumstances under which POD and TOD accounts may need to pass through probate can help you know what to expect if you are a designated beneficiary and plan more effectively.
When Might POD and TOD Accounts Be Subject to Probate?
While POD and TOD designations typically simplify the transfer of assets, certain complications — such as contested beneficiary designations, a beneficiary who has predeceased the account holder, or unresolved estate debts — can still pull these accounts into probate. To reduce the risk of probate involvement, it’s important for account holders to carefully name valid beneficiaries and consider designating alternates as a precaution.
Explore some of the reasons an account with a POD or TOD designation may become subject to probate below.
POD or TOD Designation Is Contested
If someone challenges the validity of the POD or TOD designation, the account may be frozen until the dispute is resolved — often through estate litigation.
Beneficiary designation disputes may involve claims of undue influence, fraud, forgery, a lack of mental capacity or a lack of due execution at the time the account owner added the beneficiary.
In such cases, the court may need to intervene to determine whether the designation is legally enforceable, which can delay the transfer of funds and result in an account being treated as a probate asset.
Beneficiary Predeceases Account Holder or Disclaims Inheritance
POD and TOD designations are only effective if a living, willing beneficiary exists to claim the account.
If the named beneficiary dies before the account holder and no alternate is listed, the account typically reverts to the estate and becomes subject to probate.
Likewise, if a beneficiary disclaims their inheritance and no alternate is listed, the account may be treated as though no beneficiary was ever designated.
In either situation, the assets may end up passing through probate by default.
Estate Lacks Funds to Settle Debts
Even with a valid beneficiary designation, a POD or TOD account could become vulnerable to creditor claims if the deceased person’s estate lacks sufficient assets to cover outstanding debts, tax obligations or other necessary expenses.
While creditors typically target probate assets first, they may pursue non-probate assets — including POD and TOD accounts — if the estate falls short. In such cases, POD and TOD accounts could be pulled into probate court to resolve competing claims.
Final Takeaway: Take Time to Understand TOD and POD Bank Account Rules
While POD and TOD accounts can be effective tools for avoiding probate, they are not without complications. Misunderstandings about how these designations work — or how to claim the assets — can lead to delays, disputes or even litigation.
If you’re facing challenges involving POD or TOD accounts, our probate litigation team can help clarify your rights and responsibilities. We’ll assess whether a beneficiary designation may warrant legal action and guide you through your next steps with clarity and confidence.
Still have questions about TOD or POD bank account rules?
Navigating the complexities of POD and TOD accounts can be confusing and stressful — especially when disputes, delays or questionable beneficiary designations emerge. At Keystone Law, we understand how important it is to protect your inheritance and uphold your rights as a beneficiary.
Our experienced probate attorneys will carefully review your situation, explain your options to you, and develop a strategic plan tailored to your needs. Whether it involves resolving conflicts, challenging invalid beneficiary designations or ensuring timely access to estate assets, we’re committed to guiding you every step of the way.
Contact Keystone today to discover how we can help resolve your POD or TOD account concerns efficiently and effectively.
