Do I Need TOD or POD Designations in My Estate Plan?

We recently received the question...

Every so often, someone asks us a question that seems simple but opens the door to a surprisingly confusing corner of estate planning. Recently, a client asked whether she needed “T.O.D.” (Transfer on Death) or “P.O.D.” (Payable on Death) documents included in her will. It’s a great question — and one we hear often — because these terms sound like something lawyers draft, sign, notarize, and file away in a vault.

Generally speaking, that’s not how they work.

What TOD and POD Actually Are

TOD and POD aren’t documents that go inside your will. They’re designations you place directly on your financial accounts — think bank accounts, investment accounts, retirement accounts, or life insurance contracts.

These designations tell the financial institution who should receive the asset automatically at your passing, without having to wait on your will, your personal representative, or the probate court.

In other words, your will is the safety net. TOD/POD designations are the direct flights; your will is the connecting flight in case something doesn’t go as planned.

Why People Use Them

Transfer on Death (TOD). Generally used for investment or brokerage accounts. A TOD allows the account to shift into the beneficiary’s name when you die. This can help avoid unnecessary delays — and in many cases, avoid accidental taxable events — since the beneficiary can typically continue holding those investments or merge them with their own.

Payable on Death (POD). Often used for bank accounts. Instead of transferring ownership of the account, the institution “pays out” the funds to the beneficiary. Sometimes the funds can be transferred into the beneficiary’s existing account, but the key distinction is that ownership of the original account usually does not change.

So… Do You Need Them?

Generally speaking, yes — most people benefit from using TOD or POD designations. They help assets transfer quickly, privately, and outside of probate.

But also generally speaking, they are optional. Some people rely heavily on beneficiary designations; others structure their estate planning through trusts or other tools. There’s no one-size-fits-all answer.

What is consistent is this:

• Your will is there to “catch” any asset that doesn’t have a beneficiary listed.

• TOD and POD designations move assets automatically and sit outside your will.

• If you accidentally forget to add a beneficiary (or intentionally don’t name one), the will handles it.

  
  

Why It Gets Confusing

People often use TOD and POD interchangeably — and the financial industry doesn’t always make the terminology crystal clear. But the general rule of thumb is:

• TOD → ownership transfers into the beneficiary’s name

• POD → funds are paid out to the beneficiary

The end result is the same: the person you choose receives the asset. It’s just the mechanics that differ.