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Should I Have a transfer on death (TOD) Account?

April 18, 2019
David Parker, Esq.
Eddie Van Halen left money to a foundation
David Parker, White Plains and New City NY Estate Planning Attorney
David Parker, Esq.
David Parker is an attorney who specializes in Estate Planning and Elder Law and has been practicing law for 30 years. Be it Wills, Trusts, Powers of Attorney, Health Care Proxies, or Medicaid Planning, David provides comprehensive and caring counsel for seniors and their families. A large portion of David’s practice is asset protection strategies so that families do not lose their hard earned savings to nursing home care costs. He also handles probate administration for the settlement of estates.
Also known as joint accounts, these types of accounts let their owners pass on small estates in a simple way.

A basic joint account offers a right of survivorship, but joint account holders can designate who gets the funds after the second person dies using a transfer on death (TOD) or pay-on-death (POD) account arrangements.

Most married couples share a bank account that allows either spouse to write checks and add or withdraw funds, without the permission of the other. If the wife outlives the husband, the account will be hers alone. His Last Will can’t change that.

The account is wholly owned by both, while they’re both alive. Therefore, the husband’s creditors could make a claim against the entire account, without any concern for the wife or her interests. In addition, either spouse could withdraw all the money in the account and not tell the other. This basic joint account offers a right of survivorship, but joint account holders can designate who gets the funds after the second person dies. This is accomplished with transfer on death (TOD) or pay-on-death (POD) account arrangements.

Beneficiaries of TOD or POD accounts can include persons other than the surviving spouse, like children, other relatives and friends (state law has special rights that protect the surviving spouse). The spouse of a decedent can legally claim a spousal share of assets, which is usually half. In addition, the spouse must give written consent, whenever a using a transfer on death (TOD) or pay-on-death (POD) account arrangements account directs funds to someone in addition to, or other than, the spouse.

After the decedent’s death, taking control of the account can be a relatively simple process. All that may be needed, is to provide the death certificate(s) of the owner(s) and picture identification of any beneficiary to the account custodian. Because a TOD/POD account is still part of the decedent’s estate (although not the probate estate that the Last Will establishes), it may be subject to income, estate and/or inheritance tax. A TOD/POD account is also not out of reach for the decedent’s creditors.

Of course, having multiple beneficiaries can make claiming the account a more complicated process. Some custodians require equal beneficiary shares. If multiple beneficiaries are named, most TOD/POD agreements allow the account owner to assign a percentage to each. In the event that one beneficiary predeceases the owner, that person’s share is divided among the remaining named beneficiaries. If a TOD/POD account has no beneficiary, it will then pay out to the estate, in which case the decedent’s will takes control.

If you are a TOD or POD account owner, you should be certain to update your account beneficiaries and ensure that your will and TOD/POD agreements are consistent with your intentions. If not, you may inadvertently disinherit one or more beneficiaries from the intended shares of your estate. This may result in a claim against the TOD/POD account in probate court.

If you do want to exclude some beneficiaries from the TOD/POD account, then your will can be written to include a provision allowing your TOD/POD agreement to stand separate from the terms of the will. However, be careful because the decedent estate then likely would become liable for using a transfer on death (TOD) or pay-on-death (POD) account arrangements account taxes and any creditor claims. That means reduced shares for any estate beneficiaries.

Reference: Kiplinger (March 18, 2019) “How Transfer-on-Death Accounts Can Fit Into Your Estate Planning”


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