Survey Sheds Light on the Perils of TOD and POD Account Registrations
A survey was recently circulated among the Philadelphia Bar Association Probate and Trust Section attorney members seeking commentary on their experiences with clients who have accounts registered as transfer on death (TOD) or payable on death (POD).
March 05, 2018 at 01:06 PM
6 minute read
A survey was recently circulated among the Philadelphia Bar Association Probate and Trust Section attorney members seeking commentary on their experiences with clients who have accounts registered as transfer on death (TOD) or payable on death (POD). These are accounts with special designations which cause the assets in the accounts to transfer outside of probate to the named designee, rather than pass under the probate estate (i.e., pursuant to the terms of the will). The common refrain of the attorneys responding to the survey was that TOD or POD account registrations often thwart well thought out estate plans and when not “fixed” before death, have resulted in asset dispositions at death that are inconsistent with the intentions of the account owner.
The overwhelming majority of the survey responses indicated that many clients have set up TOD or POD accounts without consulting with their estate planning attorneys, often inadvertently at the direction of the clients' financial advisers. A client may be advised that a TOD or POD account registration is beneficial because it avoids the need for probate, but the client (and perhaps the adviser) does not understand the effect this type of account registration may have on the client's estate plan. In many cases, clients may not even realize that their accounts are titled this way or do not understand that they had a choice when the account was set up.
At an estate planning meeting, even if the attorney asks the question about how accounts are registered, clients may change the title or designations on their accounts after the fact. This commonly happens when a client moves assets from one financial institution to another or when a client updates beneficiary designation forms for his or her retirement plans and a TOD account form is included in the mix for the nonretirement brokerage accounts, without the client really understanding that nonretirement accounts need not (and oftentimes should not) have beneficiary designations associated with them. There are often different considerations in naming a beneficiary for a tax-deferred retirement account than for a nonretirement account.
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