Legal Definitions - TOD

TOD stands for Transfer-on-death.

A Transfer-on-death (TOD) designation is a legal tool that allows an asset owner to name specific beneficiaries who will automatically receive that asset upon the owner's death, without the need for a court-supervised process called probate. This mechanism ensures a direct and often quicker transfer of ownership. During their lifetime, the owner retains complete control over the asset, including the right to sell it, change beneficiaries, or revoke the TOD designation entirely. The named beneficiaries do not have any rights to the asset until the owner passes away. TOD designations can be applied to various types of property, such as real estate (through a TOD deed), financial accounts (like brokerage or bank accounts), and even vehicles in some jurisdictions. Owners can also name alternate beneficiaries to ensure the asset passes to someone else if the primary beneficiary is no longer living.

• Example 1: Real Estate
  An elderly woman, Sarah, owns her home outright and wants to ensure it passes directly to her daughter, Emily, without going through the potentially lengthy probate process. Sarah executes a Transfer-on-death deed, naming Emily as the beneficiary for her house and properly records it. Upon Sarah's death, the house will automatically transfer to Emily's ownership. Sarah maintained full control of the house during her lifetime, able to sell it or change the beneficiary if she wished. The TOD deed bypasses the probate court, simplifying the transfer process for Emily.

• Example 2: Investment Account
  David has a significant investment portfolio in a brokerage account and wishes for his alma mater, a local university, to receive the funds upon his passing to support scholarships. David designates the university as the Transfer-on-death beneficiary for his brokerage account. This demonstrates TOD as the university will directly inherit the contents of David's investment account when he dies, without the need for probate. David can continue to manage, invest, or withdraw funds from the account throughout his life, and he can change the beneficiary at any time before his death.

• Example 3: Vehicle Ownership
  Maria owns a classic car that she has meticulously maintained and wishes for her grandson, Leo, to inherit it directly after she passes away, avoiding any delays. In a state that allows it, Maria completes the necessary paperwork with the Department of Motor Vehicles to add a Transfer-on-death designation for Leo to her car's title. Upon Maria's death, the ownership of the classic car will transfer directly to Leo. Maria retains full ownership and use of the car during her lifetime, and the TOD designation ensures a smooth, probate-free transfer of this specific asset to her grandson.