Transfer on Death for a Brokerage Account: What Does TOD Do?

A transfer-on-death designation, often called TOD, names who should receive eligible brokerage assets after the account owner dies. It is an estate-planning instruction, not a way to give someone control of your investments during your lifetime.

How does a TOD designation work?

FINRA explains that with a TOD, you keep control of the assets while alive. Ownership passes to the named beneficiaries after death. Your brokerage can tell you which non-retirement accounts are eligible and what paperwork applies.

A TOD generally allows the covered holdings to avoid probate. That does not make it a complete estate plan or eliminate every possible tax issue. State law, account ownership and the rest of your estate can affect the result.

Why must it match your estate plan?

A beneficiary instruction can override directions in a will. FINRA gives the example of a will dividing assets between two children while a TOD names only one. The named beneficiary receives the account assets and is not obligated by that will provision to share them.

For that reason, review actual beneficiary records rather than assuming a will automatically updates the brokerage account. Ask a trusts-and-estates lawyer to help reconcile conflicting documents, unusual family situations or questions about state law.

When should you check it?

Review the designation after major family changes and when moving an account to another firm. FINRA specifically recommends checking whether beneficiary designations carry over after a transfer.

Keep current statements and the firm's contact details in a secure place that the appropriate person can locate. Ask the brokerage what documents beneficiaries would need. Preparing that information is different from sharing login credentials or allowing someone to trade now.

Frequently asked questions

Can I change a TOD beneficiary while alive? Generally, yes, using the firm's required documents. FINRA notes that beneficiaries cannot be changed after the account owner's death.

Does TOD replace a will or legal advice? No. It addresses particular account assets and needs to be coordinated with the broader estate plan and applicable state law.

Sources and further reading: FINRA, Transfer Brokerage Assets on Death (https://www.finra.org/investors/insights/plan-ahead-transfer-your-brokerage-account-assets-death).