Q: I am wondering if POD or TOD accounts -- with assigned beneficiaries -- go directly to beneficiaries after death or do the accounts have to go through probate? No revocable trust is involved. I have read conflicting answers. Sincere thanks.
Ellie, Granite Bay
A: A financial account that has a POD ("Payable on Death") designation is one that passes to the named payee (i.e., beneficiary or beneficiaries) on the death of the account holder.
The payee has no right to the sums in the account during the account holder's lifetime, unless there is clear and convincing evidence of a different intent. The POD designation also means that the account is not included in the account holder's estate when determining whether a probate proceeding is required.
In addition, a will or a trust does not control disposition of the account because the POD transfer is an agreement between the account holder and the financial institution.
The TOD ("Transfer on Death") designation is generally used with securities. For example, such a designation would cause a share certificate to be transferred to the named transferee upon the death of the owner. As with a POD designation for a financial account, there is no ownership interest with a TOD until the death of the shares' owner.
The owner remains free to change the TOD designation at any time without the consent of the transferee. In addition, no probate proceeding is required to transfer the shares.