Who Can Be a Transfer on Death (TOD) Beneficiary?

Account holders can name almost anyone as a TOD beneficiary

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Updated February 17, 2024
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Individuals can specify a person as a transfer on death (TOD) beneficiary for retirement or other financial accounts, such as savings accounts. Beneficiaries receive the assets held in the accounts when the owner dies.

Naming beneficiaries helps heirs avoid the sometimes costly process of probate. A TOD beneficiary can be a person, charity, business, or trust. If the beneficiary is a person, they can be a relative, child, spouse, or friend.

Key Takeaways

  • Naming a transfer on death (TOD) beneficiary for accounts helps simplify the inheritance process.
  • A beneficiary will automatically receive the assets in the account, thus bypassing probate. 
  • Anyone can be named a TOD beneficiary, including family, friends, charities, or trusts. 
  • A TOD beneficiary can be added to retirement accounts, certificates of deposit (CDs), and brokerage accounts.

Naming a Transfer on Death (TOD) Beneficiary

A TOD beneficiary can be named on individual retirement accounts (IRAs), 401(k)s, and other financial instruments. The Uniform Transfer on Death Securities Registration Act allows owners in most U.S. states to name beneficiaries for their stocks, bonds, or brokerage accounts. Individuals can also open a payable-on-death bank account to distribute cash assets after they pass away and avoid probate. In some states, vehicles and real estate can be transferred by TOD.

A TOD beneficiary can be a relative, child, friend, charity, business, or trust. Married individuals can name a TOD beneficiary, but spousal rules may apply, especially for retirement accounts. A surviving spouse is also commonly afforded additional options for how and when to withdraw money from inherited accounts. Unmarried individuals may choose any beneficiary, but withdrawals may be subject to rules based on the type of account.

Multiple TOD beneficiaries can be named on one account with the percentage of assets specified for each designated beneficiary. This helps the executor distribute assets. Those who designate beneficiaries retain total control over all assets until they die. Named beneficiaries have no access to the assets as long as the account owner is alive.

A spouse may have special rights over assets that precede a named TOD beneficiary. These laws vary by state.

Why Designate a TOD Beneficiary?

The primary advantage of naming TOD beneficiaries is that the inheritance process is much simpler, faster, and less expensive. The owner has defined who will receive their assets when they pass away. The TOD beneficiary instruction allows heirs to avoid probate and takes precedence over any will that might be in place.

However, naming TOD beneficiaries doesn’t provide much creditor protection, in which case a trust may be a better option. TOD beneficiaries will also be responsible for paying taxes on the money they receive.

A professional financial advisor can guide account holders through the pros and cons of naming TOD beneficiaries as it relates to long-term goals and financial situations.

Who Can Be Named As a Transfer on Death (TOD) Beneficiary?

Almost anyone is a transfer on death (TOD) beneficiary. A TOD beneficiary can be a person, charity, business, or trust. If the beneficiary is a person, they can be a relative, child, spouse, or friend. Spouses may have special rights over assets that precede named TOD beneficiaries.

How Do Individuals Name a TOD Beneficiary?

To name a TOD beneficiary, individuals should work with the account provider. A TOD beneficiary can be added to many account types like retirement accounts, certificates of deposit (CDs), savings accounts, and brokerage accounts.

Why Name a TOD Beneficiary?

Naming a TOD beneficiary, or several beneficiaries, can have advantages during the inheritance process. Naming beneficiaries makes it clear who will inherit assets. Assets can be distributed without passing through the potentially costly and lengthy probate process.

The Bottom Line

Naming a TOD beneficiary can make the inheritance process simpler because a named beneficiary will automatically receive the assets in the account, bypassing probate. A TOD beneficiary can be family, friends, a business, a trust, or a charity.

Article Sources
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  1. Uniform Law Commission. “TOD Security Registration Act.”

  2. Wells Fargo. “Transfer and Payable on Death Account Designations.”

  3. Korsinsky & Klein. “Does a POD Account Override a Will?.”

  4. U.S. Securities and Exchange Commission. “Transfer on Death (TOD) Registration.”

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