Transfer-on-Death Designations: Potential Pitfalls

When used in consultation with an estate planning attorney, transfer-on-death (TOD) or payable-on-death (POD) designations on financial accounts can be valuable estate planning tools. However, these account designations have the potential to derail an estate plan when not coordinated properly with the overall plan. Consulting with an estate planning attorney is critical when considering a TOD/POD designation, and caution is required when opening financial accounts to avoid unwanted results.

Transfer-on-death (TOD) or payable-on-death (POD) designations can be placed on most financial accounts to name a beneficiary to receive the account assets upon the death of the account owner. A primary benefit of using TOD/POD designations is that assets held in the account will pass automatically to the beneficiary without having to go through probate. One or more beneficiaries can be designated to receive an account, and such designations are fully revocable by the account