The Pros and Cons of Transfer on Death Accounts

The Pros and Cons of Transfer on Death Accounts

The Transfer on Death (TOD) account or a Pay on Death (POD) account is a type of account often used for estate planning purposes due to its ability to bypass the probate process. Any assets placed in the account pass on directly to the beneficiary named by the owner of the account.

Here’s a quick look at some of the pros and cons of using these types of accounts in your estate plan.


  • Bypass probate: The primary advantage of TOD/POD accounts is that you can distribute assets upon your death outside of probate, directly to designated beneficiaries. Using a TOD designation can reduce the amount of time it takes for your loved ones to receive their inheritance.


  • Disinheritance: In some cases, a desired beneficiary may be disinherited. Say, for example, you have a joint account with your spouse that provides that on the death of the second of you to die, the account is to be paid on death to your children. If one spouse dies, the surviving spouse has full control over the beneficiaries. If they remarry, they could disinherit children from the first spouse. This might not seem likely, but it is a possibility.
  • Partial Disinheritance: It is not uncommon for someone to name two accounts of equal amounts as TOD/POD each to one child with the intent that each child would receive an equal amount on the death of the account owner. Then, over time, one account grows more than the other or one is depleted more than the other resulting in one child inheriting an account more valuable than the other child’s account.
  • Minors: Naming minors as beneficiaries could result in difficulties if they are still minors upon your death. They do not have any legal authority to receive investments from estate plans until they reach the age of majority.
  • Updates: You will need to make sure you regularly review and update the beneficiaries to your TOD/POD account, especially if a beneficiary dies before you or you change your mind about who should inherit.

To learn more about the advantages and drawbacks of using TOD accounts, contact an experienced Tampa estate planning attorney at BaumannKangas Estate Law.