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

You can name almost anyone as a TOD beneficiary

A person named as a transfer on death (TOD) beneficiary for an account will receive the assets held in it when the account owner dies. It’s possible to name a TOD beneficiary for many account types—retirement accounts, savings accounts, and even brokerage accounts—and this can help you and your heirs avoid the sometimes costly process of probate

The rules are quite broad when it comes to naming TOD beneficiaries. A TOD beneficiary can be a person, charity, business, or trust. If the beneficiary is a person, they can be a relative, child, spouse, friend, or anyone else you happen to know. However, if you are married, your spouse may have special rights over your assets that take precedence over your named TOD beneficiaries.

In this article, we’ll explain who you can name as a TOD beneficiary, and why you would.

Key Takeaways

  • Naming a transfer on death (TOD) beneficiary for your accounts can make the inheritance process much simpler, because your named beneficiary will automatically receive the assets in the account, thus bypassing probate. 
  • You can name almost anyone as a TOD beneficiary: family, friends, or anyone else. You can also name charities, businesses, or trusts. 
  • Many account types allow you to name a TOD beneficiary. You can add a TOD beneficiary to retirement accounts, certificates of deposit (CDs), and even brokerage accounts. To do so, contact your account provider.

Naming a Transfer on Death (TOD) Beneficiary

You can name a TOD beneficiary for many account types. Individual retirement accounts (IRAs), 401(k)s, and other retirement accounts can have TOD beneficiaries named. The Uniform Transfer on Death Securities Registration Act lets owners name beneficiaries for their stocks, bonds, or brokerage accounts. It’s also possible to open a payable-on-death bank account to distribute cash assets after you pass away without having to put them through probate. In some states, even vehicles and real estate can be transferred by TOD.

You can name a very wide variety of people, organizations, or other entities as a TOD beneficiary. If you want to name a person, they can be almost anyone: a relative, child, friend, or anyone else you happen to know. You can also name a charity, a business, or even a trust.

An unmarried person may choose anyone as a beneficiary, but a married person’s spouse may have rights to some or all of a retirement account upon death. A surviving spouse also may have more options for withdrawing money than other beneficiaries do; it depends on the rules that apply to each individual account. 

You can name as many (or as few) TOD beneficiaries as you like, and you can also use these to specify the percentage of assets that each designated beneficiary should receive. This helps the executor distribute your assets. With TOD registration, the named beneficiaries have no access to or control over a person’s assets as long as the person is alive, so you retain total control over your assets until you pass away.

You can name anyone as a TOD beneficiary, but if you are married, your spouse may have special rights over your assets that take precedence over your named TOD beneficiaries. These laws vary by state, though.

Why Designate a TOD Beneficiary?

The primary advantage of naming TOD beneficiaries for your accounts is that this can make the inheritance process much simpler, faster, and less expensive. If you name TOD beneficiaries, it’s very clear who you want to receive your assets when you pass away. This instruction not only allows your heirs to avoid probate for these assets but also takes precedence over any will that might be in place. This can make the legal process of distributing assets much faster than it otherwise would be.

That said, naming TOD beneficiaries may not achieve everything you would like to achieve in your inheritance settlement. Passing on assets in this way doesn’t provide much in the way of creditor protection, for instance—in that case, a trust may be a better option. In addition, your TOD beneficiaries will be responsible for paying taxes on the money they receive in this way. At the very least, this will complicate their tax situation; however, it also may mean a large tax bill for them.

Who can I name as a transfer on death (TOD) beneficiary?

Almost anyone. A transfer on death (TOD) beneficiary can be a person, charity, business, or trust. If the beneficiary is a person, they can be a relative, child, spouse, friend, or anyone else you happen to know. However, if you are married, your spouse may have special rights over your assets that take precedence over your named TOD beneficiaries.

How do I name a TOD beneficiary?

You should contact your account provider. You can add a TOD beneficiary to many account types—not only retirement accounts but also certificates of deposit (CDs), savings accounts, and even brokerage accounts.

Why should I name a TOD beneficiary?

Naming a TOD beneficiary (or several beneficiaries) can have advantages during the inheritance process. Naming beneficiaries makes it clear who you would like to inherit your assets, and these then can be distributed without passing through the potentially costly process of probate.

The Bottom Line

Naming a TOD beneficiary for your accounts can make the inheritance process much simpler, because your named beneficiary will automatically receive the assets in the account—bypassing probate as a result. You can name almost anyone as a TOD beneficiary: family, friends, or anyone else. You can also name charities, businesses, or trusts. 

Many account types allow you to name a TOD beneficiary. You can add a TOD beneficiary to retirement accounts, CDs, and even brokerage accounts. To do so, contact your account provider.

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

  2. Cornell Law School, Legal Information Institute. “Transfer-on-Death (TOD).”