What is a transfer on death (TOD) or payable on death (POD) beneficiary designation?
A Transfer on Death (TOD) and Payable on Death (POD) beneficiary designation are non-probate estate planning tools that allow assets to pass directly to a named beneficiary upon the account or asset owner's death, bypassing the probate process.
Payable on Death (POD) Designation
POD is most commonly used for bank accounts (checking, savings, CDs, etc.).
The account owner designates a beneficiary (or multiple beneficiaries) with the financial institution.
During the owner’s lifetime, the beneficiary has no rights to the account.
Upon the owner’s death, the funds in the account pass directly to the named beneficiary, who can claim the funds by presenting a death certificate and proof of identity.
The account does not become part of the probate estate, and the beneficiary designation overrides any contrary provision in a will or trust.
The owner can change or revoke the POD designation at any time before death.
Transfer on Death (TOD) Designation
TOD is used for securities (stocks, bonds, brokerage accounts)
The owner registers the asset in "beneficiary form," naming who will receive the asset upon death.
The owner retains full control and can sell, transfer, or revoke the designation at any time.
Upon the owner’s death, the asset passes directly to the named beneficiary, outside of probate.
Key Features and Considerations
Both POD and TOD designations are revocable and do not give the beneficiary any rights until the owner’s death.
These designations are effective by contract and are considered nontestamentary transfers under North Carolina law (NCGS § 41-48).
If all named beneficiaries predecease the owner, the asset will generally revert to the owner’s estate and be subject to probate.
These designations do not protect the asset from the owner’s creditors; if the estate is insolvent, creditors may be able to reach the asset.
Practical Uses
POD: Used for bank accounts to ensure quick access to funds for beneficiaries and to avoid probate delays.
TOD: Used for investment accounts to streamline the transfer of ownership and avoid probate.