When a loved one dies, their family may have to go through probate before the family can distribute certain assets. Probate can involve court filings, a lot of paperwork and delays. However, not every asset has to go through this process but can pass directly to a named beneficiary.
In Tennessee, families can use two tools for this purpose: transfer-on-death (TOD) and payable-on-death (POD) designations.
Why TOD and POD designations matter for an estate plan
How a TOD or POD designation works depends on the type of asset and how the owner sets it up. Once in place, the named beneficiary can claim the asset directly after the owner’s death without going through probate court. For Knoxville families, that can mean one fewer process to manage. Common considerations for families using these designations include:
- TOD designations for eligible securities: It allows the account owner to name a beneficiary for certain securities or investment accounts. Those assets then pass directly to the named beneficiary after the owner’s death. Tennessee law provides that ownership passes directly to surviving beneficiaries when the sole owner or last surviving owner dies.
- POD designations for eligible bank accounts: A payable-on-death designation lets a bank account go directly to a named beneficiary when the owner dies. Tennessee law permits financial institutions to offer accounts with this type of designation.
A TOD or POD designation generally determines who receives the asset, taking precedence over a will. The owner can change or cancel the beneficiary choice at any time before death. Therefore, they should regularly review and update these designations after major life events, such as a marriage, divorce or the death of a beneficiary.
In both cases, the owner keeps full control of the asset during their lifetime. The beneficiary has no rights to it until the owner dies.
Working with an estate planning attorney
By setting up TOD and POD designations now, Knoxville families can reduce court involvement for their loved ones later. This can help assets pass to beneficiaries more smoothly after death. For families with multiple accounts across different institutions, reviewing all of them together as part of a broader estate plan is important. An experienced estate planning attorney can help families use these tools correctly.