In finance, TOD stands for Transfer on Death, a beneficiary designation you attach to an account so its assets pass directly to a named person when you die. The transfer happens outside probate, which means no court supervision, no waiting for a will to be validated, and no public record of the assets moving. You keep full control of the account during your lifetime, and the beneficiary has no rights to anything until after your death.1FINRA. Plan Now to Smooth the Transfer of Your Brokerage Account Assets on Death
What TOD Actually Does on an Account
A TOD designation is a set of instructions built into the account registration itself. When you die, ownership shifts automatically to the beneficiary you named. No executor is involved, no court approval is required, and the assets do not enter the probate estate.
During your lifetime, the TOD label changes nothing about how you use the account. You can buy and sell investments, deposit and withdraw money, or close the account entirely, all without the beneficiary’s knowledge or permission. You can also change the beneficiary whenever you want by submitting an updated form to the financial institution. The designation is fully revocable until the moment you die.
Accounts That Can Carry a TOD Label
TOD designations apply to most non-retirement investment accounts. Individual brokerage accounts, individual stocks, corporate and government bonds, and mutual fund shares held outside a retirement plan all qualify. If you hold these through a brokerage firm, one TOD form typically covers every asset in the account.1FINRA. Plan Now to Smooth the Transfer of Your Brokerage Account Assets on Death
Bank accounts use a nearly identical mechanism under a different name. Savings and checking accounts carry a Payable on Death (POD) designation instead of TOD. The practical result is the same: the money goes to the named person without probate.
Retirement accounts such as IRAs and 401(k)s are not labeled TOD because they already have their own beneficiary systems governed by federal tax law and, for employer plans, ERISA. The idea is similar, but the rules around required distributions and tax treatment for the heir are different.
How TOD Relates to Your Will
The TOD beneficiary designation controls who gets the assets, regardless of what your will says. If your TOD form names your sister but your will leaves “all investments” to your brother, your sister still gets the TOD account. Wills govern only probate assets, meaning property that has no built-in transfer mechanism. TOD accounts, life insurance policies, and retirement accounts all pass by beneficiary designation and sit outside the will’s reach.
That makes keeping TOD forms current just as important as keeping your will current. After a marriage, divorce, birth of a child, or the death of someone you had named, review every designation to make sure it still reflects what you want.
How to Add a TOD Beneficiary
To add a TOD beneficiary, fill out a beneficiary designation form from your brokerage firm or mutual fund company. Most firms make it available through the account settings section of their online portal, and you can also request a paper form. Expect to provide the following for each person you name:
- Full legal name as it appears on their government-issued ID
- Social Security number, for tax reporting after the transfer
- Date of birth, used to verify identity and flag minors
- Relationship to you (spouse, child, sibling, or other)
If you name more than one person, assign each a specific percentage, and the percentages must add up to exactly 100. If the math is off or information is missing, the firm will reject the form until you fix it.
Primary and Contingent Beneficiaries
Most forms let you name both primary and contingent (backup) beneficiaries. Primary beneficiaries inherit first. Contingent beneficiaries receive the assets only if every primary beneficiary has died, cannot be located, or refuses the inheritance. Naming contingents adds a safety net that keeps the account out of probate if your first choices are gone.
Per Stirpes Versus Per Capita
Some TOD forms ask you to choose between per stirpes and per capita distribution. It matters when a beneficiary dies before you do.
- Per stirpes (by branch): if a beneficiary predeceases you, that person’s share passes to their own children. Name two children equally and one dies before you, and that child’s 50 percent goes to their kids.
- Per capita (by head): only surviving beneficiaries receive a share. Same scenario, and your surviving child takes the entire account.
If you leave the choice blank, the default depends on your state’s law and the firm’s own policy. Picking one removes the guesswork.
Taxes on Inherited TOD Assets
Skipping probate is not the same as skipping taxes. Two separate tax questions come up for TOD assets.
Stepped-Up Cost Basis
When you inherit securities through a TOD account, the cost basis of those investments resets to their fair market value on the date of the owner’s death. This is the stepped-up basis. If the original owner bought a stock for $10,000 and it was worth $50,000 at death, your basis as the beneficiary is $50,000. Sell it shortly after for $50,000 and you owe no capital gains tax on the $40,000 of growth that happened during the original owner’s lifetime.2Office of the Law Revision Counsel. 26 USC 1014 Basis of Property Acquired From a Decedent
Any income the inherited assets produce after the transfer, whether dividends, interest, or gains from later sales above the stepped-up basis, is taxable to the beneficiary in the year it is received.
Federal Estate Tax
Even though TOD assets skip probate, they still count as part of the deceased owner’s gross estate for federal estate tax. Probate is a court process for distributing property; estate tax is a tax on the total value of what a person owned at death. For 2026, the federal estate tax exemption is $15,000,000 per individual, so this only affects estates above that threshold.3Internal Revenue Service. What’s New – Estate and Gift Tax
Situations Where TOD Gets Complicated
Divorce
Roughly half the states have laws that automatically revoke an ex-spouse’s TOD designation once a divorce is finalized. In those states, the designation is treated as if the ex-spouse had died before the account owner. The other states have no automatic revocation, so an ex-spouse would still inherit unless the form is updated. Whatever state you live in, submitting a new designation right after a divorce is the safe step.
Naming a Minor
If you name a child under 18 as a TOD beneficiary, the financial institution generally cannot release the assets directly to the child. Someone has to manage the money on the minor’s behalf, either a custodian named under the Uniform Transfers to Minors Act (UTMA) or a court-appointed guardian. Court-appointed guardianship is slow and expensive, which is exactly what TOD is meant to avoid. If you want a minor to benefit, consider naming a UTMA custodian on the form or setting up a trust.
Joint Accounts With Right of Survivorship
When an account is held jointly with right of survivorship, the surviving co-owner automatically becomes full owner when the other dies. A TOD designation on that account only activates after the last surviving co-owner dies. The co-owner’s rights come first, and the TOD beneficiary inherits only when no co-owner is left.
Creditor Claims
TOD assets are not automatically shielded from the deceased owner’s debts. Many states have adopted some version of the Uniform Nonprobate Transfers on Death Act, which lets creditors reach TOD assets when the probate estate is not large enough to cover what the deceased owed. A beneficiary’s liability under those rules generally cannot exceed the value of what they received. States without that kind of statute may let TOD assets pass free of unsecured debts. If you inherit a large TOD transfer from someone who had significant debt, consult an attorney in the relevant state.
Claiming a TOD Account After the Owner Dies
The beneficiary starts the transfer by contacting the financial institution’s estate or transfer services department. Expect to provide:
- A certified death certificate from the state or local vital records office (most firms want an original certified copy, not a photocopy)
- Government-issued photo ID to confirm the beneficiary’s identity
- Completed transfer paperwork provided by the institution to re-title the assets
If the deceased owner held physical stock certificates rather than electronic holdings, the firm or transfer agent may also require a Medallion Signature Guarantee, a special stamp from a participating bank or brokerage that verifies the beneficiary’s signature.4Investor.gov. Transferring Assets
Once the paperwork is accepted, the firm typically re-titles the assets into a new account in the beneficiary’s name within a few weeks. From that point the beneficiary can hold, sell, or transfer the investments freely.
TOD Deeds for Real Estate
The TOD idea extends beyond financial accounts. Around 30 states and the District of Columbia allow Transfer on Death deeds, sometimes called beneficiary deeds, for real property. These let you name someone to inherit your home or other real estate without probate. A handful of additional states offer a similar tool known as an enhanced life estate deed that achieves essentially the same result.
The deed must be signed, notarized, and recorded with the county recorder’s office before the owner dies. Like a TOD designation on a brokerage account, the deed is revocable during the owner’s lifetime, and the named beneficiary has no ownership interest until the owner’s death.