Payable-on-Death (POD) and Transfer-on-Death (TOD) designations for beneficiaries are similar, but used for different purposes. Both directly transfer assets to “designated beneficiaries” without the use of a Trust or a Will, following a death. A POD is generally used to designate beneficiaries in instruments like bank accounts, while a TOD is used when assets other than cash, such as a stock portfolio, paid to one or more individuals following the death of the owner. Importantly, certain assets like retirement accounts and insurance policies are generally transferred with a POD or TOD and not a Will or Trust—though you should consider a specialized IRA Legacy Trust for your retirement accounts.
Please note that PODs and TODs must be documented properly at the institution holding the assets, such as a bank or a brokerage firm—you cannot specify them in any other way. They should also name persons, not Trusts or “Estates.” Many families suffer because PODs and TODs at multiple institutions are not updated properly following births, deaths, or re-marriages—or because there is a conflict between what’s written in the POD/TOD vs a Will. Importantly, heirs must take action to exercise their own POD and TOD beneficiary rights, because no Executor or Trustee is necessarily acting on their behalf. Indeed, such assets may not even be mentioned in a Will or Trust, so Beneficiaries may have to make inquiries to discover them.