A TOD account lets you name someone to inherit your money without going through probate
A TOD account (Transfer on Death) is a bank account with a named beneficiary — someone you choose to receive the money when you die. The account works like a regular checking or savings account while you're alive. You can deposit, withdraw, and spend the money freely. When you pass away, the money goes directly to the person you named, bypassing the probate process (the court system that normally distributes a person's assets after death).
TOD accounts are sometimes called "payable on death" or POD accounts — the terms mean the same thing. They exist specifically to make it simpler and faster for your family to access money you leave behind.
Key Takeaways
- A TOD account is a regular bank account where you name a beneficiary to receive the money after you die, without court involvement.
- You keep full control of the account while alive — the beneficiary has no access to the money or account details during your lifetime.
- The money passes to your beneficiary outside of probate, which usually means they can access it within weeks rather than months or years.
- You can change or remove the beneficiary at any time, and you can name multiple beneficiaries to split the money between them.
- Not all banks offer TOD accounts, so you will need to ask your bank whether this option is available.
How a TOD account differs from a joint account
The key difference is control. In a joint account, both account holders can access and withdraw money right now. In a TOD account, only you can access the money while you're alive — the beneficiary has no rights to it until after you die.
This matters because it protects the money from your beneficiary's creditors, ex-spouses, or their own financial problems. It also means you don't have to worry about them accidentally spending money you meant to leave them, or about them having a claim on the account if your relationship changes.
A TOD account also avoids the risk that comes with adding someone as a joint owner: if you add your adult child to your account as a joint owner, they could theoretically withdraw all the money and leave you with nothing. A TOD beneficiary cannot do that.
Setting up a TOD account at your bank
Start by asking your bank whether they offer TOD accounts. Not all banks do, though most larger banks and credit unions have them. If your current bank doesn't offer them, you can open a new account at a bank that does.
When you open the account or convert an existing account to TOD status, the bank will ask you to name your beneficiary. You'll provide their full legal name and usually their Social Security number. Some banks allow you to name more than one beneficiary — for example, you could split the money equally between two children, or name a primary beneficiary and a backup in case the first person dies before you do.
The bank will give you a form to sign confirming the beneficiary designation. Keep a copy for your records. There is no cost to set up a TOD account — it's a standard feature at banks that offer it.
What happens to the money after you die
When you pass away, your family or executor will need to notify the bank and provide a death certificate. The bank will then transfer the money directly to your named beneficiary. This process usually takes a few weeks, depending on how quickly the bank processes the paperwork.
Because the money passes outside of probate, your beneficiary doesn't have to wait for a court to approve the transfer or for your entire estate to be settled. If you have other assets (a house, investments, or personal property), those may still go through probate, but the TOD account money moves quickly.
The beneficiary will receive the full balance in the account at the time of your death. If you've spent some of the money before you die, that's fine — they inherit whatever is left.
Changing or removing a beneficiary
You can change your TOD beneficiary at any time while you're alive. Contact your bank, fill out a new beneficiary designation form, and sign it. The new beneficiary replaces the old one — the previous person has no claim to the money.
You can also remove a beneficiary entirely, which turns the account back into a regular account with no named heir. If you do this, the money will become part of your estate and go through probate when you die, unless you name a new beneficiary later.
Keep your beneficiary designation current. If you go through a major life change — a marriage, divorce, or the birth of a child — review your TOD accounts and update them if needed. Many people forget to do this and end up leaving money to an ex-spouse or missing a child they wanted to include.
Tax and legal considerations
A TOD account does not reduce your taxes or your estate's taxes. The money you leave behind is still part of your taxable estate, and your beneficiary may owe income tax on any interest the account earned. However, the TOD structure itself has no tax advantage — it's purely about avoiding probate.
TOD accounts are recognized in all 50 states, but the exact rules vary slightly by state. Most states allow you to name any person as a beneficiary — a family member, a friend, or even a charity. Some states have restrictions on who can be named, so ask your bank about your state's rules if you want to name someone outside your family.
A TOD account is not a substitute for a will. If you have minor children, property, or complex finances, you still need a will to name a guardian for your children and to direct what happens to assets that don't have a named beneficiary. A TOD account straightforward handles one piece of your estate planning.
When a TOD account makes sense
A TOD account works well if you want a straightforward, fast way to leave money to one or two people without the cost and delay of probate. It's especially useful if you have a modest amount of money in savings and want to avoid putting your family through court proceedings.
A TOD account is less useful if you want to split money among many people, if you want to leave money to a minor (who cannot legally control an account), or if you want conditions on how the money is used. In those cases, a will or a trust gives you more control.
You can also combine a TOD account with other tools. For example, you might have a TOD savings account for your children and a will that handles your house and other property. There's no rule against using multiple methods to plan your estate.
Frequently Asked Questions
Can the beneficiary see the account or withdraw money before I die?
No. The beneficiary has no access to the account, no right to see the balance, and no ability to withdraw money while you're alive. Only you can use the account. The beneficiary's rights begin only after you die and the bank is notified.
What if I name someone as a TOD beneficiary and then we have a falling out?
You can change the beneficiary at any time by contacting your bank and completing a new designation form. The previous beneficiary has no legal claim to the money once you've named someone else. There's no waiting period or approval needed — the change takes effect when you sign the form.
Can my creditors take money from a TOD account?
While you're alive, creditors can pursue a TOD account like any other account you own. After you die, creditors may have a claim against your estate, but the TOD money usually passes to the beneficiary before creditors can reach it. The exact rules depend on your state and the type of debt.
What happens if my beneficiary dies before I do?
The money stays in your account. You should update your beneficiary designation to name someone else, or decide whether you want the money to go through probate instead. If you don't update it and you die without naming a new beneficiary, the account becomes part of your estate.
Do I need a lawyer to set up a TOD account?
No. Your bank handles the paperwork, and there's no cost. You straightforward fill out a beneficiary designation form and sign it. A lawyer is only necessary if your situation is complex — for example, if you have a large estate, minor children, or significant debts.