A transfer-on-death account registration is a beneficiary designation you add to a brokerage or securities account so that, when you die, the assets pass directly to the person you named without going through probate. It works like a contract between you and your financial institution: you stay in full control of the account while you’re alive, and the firm transfers the holdings to your beneficiary after your death based on the paperwork you filed. Setting one up is free at most brokerages.
What Accounts and Securities Qualify
Most standard investments can carry a TOD designation. That includes individual shares of common or preferred stock, corporate bonds, government treasury notes, mutual fund shares, and exchange-traded funds.1Legal Information Institute. Uniform Transfer-on-Death Securities Registration Act A brokerage account holding a mix of these can usually be designated as a whole, so you don’t need to register each holding separately.
Single-owner accounts are the cleanest case. Joint accounts with right of survivorship can also carry a TOD, but the beneficiary only receives assets after the last surviving co-owner dies.
Two boundaries matter here. Bank accounts, certificates of deposit, and savings bonds use a parallel mechanism called payable-on-death (POD) rather than TOD, so if you want the same arrangement for your checking account you’ll need to set it up separately at the bank. Retirement accounts like IRAs and 401(k) plans are not covered by TOD at all; they have their own beneficiary designation systems governed by federal tax law and, for employer plans, ERISA. Setting up a TOD on your taxable brokerage account at a firm does nothing for the IRA you hold at the same firm. Check each account on its own.
How to Set One Up
You complete a beneficiary form through your brokerage or the transfer agent that manages your securities. For each beneficiary you’ll provide full legal name, current address, date of birth, and Social Security number. The Social Security number is used for IRS reporting after the transfer.2Legal Information Institute. Transfer-on-Death (TOD)
You can name more than one beneficiary and assign each a percentage. If you name several without specifying shares, most firms default to equal splits. Name at least one contingent beneficiary too. If your primary beneficiary dies before you and no backup is listed, the account will usually fall into probate, which defeats the purpose.
Your signature is required, and many firms also require a Medallion Signature Guarantee, a certification stamp issued by a participating bank or brokerage that verifies your identity and signature. It’s a higher standard than a notary, designed to prevent fraudulent securities transfers. Most institutions provide it free to existing customers, usually in person at a branch.
What You Can Still Do With the Account
You keep full ownership and control for your entire life. You can sell holdings, withdraw cash, or close the account without telling your beneficiary or getting their permission.1Legal Information Institute. Uniform Transfer-on-Death Securities Registration Act You can change or remove beneficiaries any time by filing a new form. The beneficiary has no access and no veto while you’re alive.
That is the key difference between a TOD and a joint account. A joint owner can withdraw funds immediately. A TOD beneficiary has no rights at all until you die, and only then to whatever is left in the account.
One caution about incapacity: if you become unable to manage your affairs, the person holding your power of attorney generally cannot create or change TOD designations unless the POA document explicitly grants that specific authority. Most standard POA forms don’t include it. If you want your agent to have that power, or want to make sure they don’t, say so in the document.
How the Transfer Happens After You Die
Your beneficiary contacts the firm and provides a certified copy of the death certificate. The firm then supplies an inheritance claim form or a new account application. Rather than selling the securities and cutting a check, most firms transfer the holdings in-kind into a new account in the beneficiary’s name, preserving the investments at current market value.2Legal Information Institute. Transfer-on-Death (TOD)
Once the firm has complete paperwork, the process typically wraps up within a few weeks. Probate, by comparison, routinely runs six months to over a year. After the transfer, the beneficiary has full authority to hold, manage, or sell the inherited assets.
Taxes the Beneficiary Should Expect
Skipping probate doesn’t mean skipping taxes. Three separate questions matter.
Stepped-Up Cost Basis
Securities inherited through a TOD get a stepped-up cost basis to fair market value on the date of the owner’s death.3Office of the Law Revision Counsel. 26 USC 1014 – Basis of Property Acquired From a Decedent If the original owner paid $10,000 for stock worth $80,000 at death, your basis resets to $80,000. Sell it the next day at that price and you owe no capital gains tax. One exception: if you gave the property to the decedent within a year before their death, the stepped-up basis doesn’t apply.4Internal Revenue Service. Publication 551 (12/2025), Basis of Assets
Federal Estate Tax
TOD assets are included in the deceased owner’s gross estate for federal estate tax purposes. The IRS treats the gross estate as everything the decedent owned or had certain interests in at death, including TOD-designated securities.5Internal Revenue Service. Estate Tax For 2026, a federal estate tax return is required only when the gross estate exceeds $15,000,000, a threshold set by the One, Big, Beautiful Bill signed into law on July 4, 2025.6Internal Revenue Service. What’s New – Estate and Gift Tax Most families won’t cross that line, but the account still counts toward it.
Income Tax After the Transfer
While the owner is alive, they report and pay tax on dividends, interest, and realized gains in the account. After the date of death, that responsibility shifts to the beneficiary, and the brokerage will issue 1099 forms reflecting the change of ownership.
Where TOD Registrations Go Wrong
The designation operates as a contract outside your will, so the assets pass to whoever is named on the form regardless of what your will says. If your will leaves everything to your daughter but your brokerage TOD names your brother, your brother gets the brokerage account. That mismatch catches people out most often after divorce or remarriage.
Divorce
A majority of states have adopted revocation-on-divorce statutes modeled on Section 2-804 of the Uniform Probate Code, which automatically revokes a TOD naming a former spouse once the divorce is final. In those states the ex-spouse is treated as if they predeceased you, and the assets go to any contingent beneficiary, or to your probate estate if there isn’t one. Not every state follows that approach, and the brokerage holding your account may not know how your state handles it. The safe move after divorce is to file a new beneficiary form yourself rather than relying on a statute you may not fully understand.
Spousal and Community Property Rights
In community property states, your spouse may own half of the account by law if the securities were acquired during the marriage with marital funds, regardless of whose name is on it. A TOD naming someone other than your spouse doesn’t override that interest. In some community property jurisdictions, the TOD applies only to the 50 percent the surviving spouse doesn’t already own. In non-community-property states, surviving spouses may have elective share rights that reach some portion of the estate; whether those rights extend to TOD assets varies by state. If you plan to name someone other than your spouse, an estate planning attorney in your state is worth the fee.
Creditors
TOD assets are not automatically shielded from the deceased owner’s debts. When the probate estate can’t cover what the decedent owed, creditors in many states can pursue beneficiaries directly, using theories like unjust enrichment, fraudulent transfer, or state statutes that reach nonprobate transfers when the estate is insolvent. Medicaid estate recovery is a frequent example; some states define “estate” broadly enough to include TOD accounts when recovering long-term care costs.
When a Beneficiary Dies First
If your named beneficiary dies before you and you don’t update the form, the result depends on whether you named a contingent. With a contingent in place, the assets pass to that person. Without one, the TOD usually lapses and the account drops into your probate estate, to be distributed under your will or your state’s intestacy rules. Most states do not apply anti-lapse statutes to TOD designations the way they do to bequests in a will, so contingent beneficiaries aren’t a nicety; they’re what keeps the arrangement working.
Review the designations after any significant life event: divorce, remarriage, the birth of a child, the death of a named beneficiary. A TOD only does its job when the names on the form still match the people you want to inherit.