Joint accounts and transfer-on-death (TOD) designations are two of the simplest tools for passing assets outside of probate. They require no attorney, no trust, and no complicated legal process. But they also have important limitations that make them unsuitable as a complete estate plan on their own.
Joint Accounts with Right of Survivorship
A joint account with right of survivorship (JTWROS) is owned equally by two people. When one owner dies, the surviving owner automatically becomes the sole owner — the account doesn't go through probate.
This is how most married couples hold joint bank accounts. It's simple, effective, and immediate — the surviving spouse has full access to the account from day one without waiting for probate.
Important limitation: If both owners die simultaneously, or the surviving owner dies before transferring or retitling the account, the probate issue returns. JTWROS works well as one component of a plan, but doesn't eliminate the need for a will or other estate planning.
Another consideration: Adding someone as a joint owner gives them full access to the account during your lifetime — which may be exactly what you want, or may be a concern if the relationship changes.
Tenants in Common
A different form of joint ownership — "tenancy in common" — does not include survivorship rights. Each owner's share passes through their estate according to their will or intestate laws. This is common for real estate held jointly by business partners or friends who want their share to go to their own heirs, not to each other.
Payable-on-Death (POD) Designations
A POD (payable-on-death) designation can be added to most bank accounts and CDs. The account owner retains full control during their lifetime — the named beneficiary has no rights until death. At death, the funds pass directly to the named beneficiary outside of probate.
To add a POD designation, contact your bank and complete a beneficiary designation form. This is typically free and takes just a few minutes.
Transfer-on-Death (TOD) Designations
TOD designations work like POD designations but apply to investment and brokerage accounts. The account owner retains full control during their lifetime. At death, the account transfers to named beneficiaries outside of probate.
TOD designations can also be registered on vehicle titles and (in many states) real estate deeds — allowing those assets to transfer without probate as well.
Advantages
- Simple to set up
- Free or low-cost
- Assets transfer immediately without probate
- Beneficiary can access funds within days
Limitations
- No provisions for disability or incapacity during your lifetime (unlike a trust)
- If beneficiary dies before you and no contingent is named, assets may go through probate
- No control over when or how a beneficiary receives the funds (all at once, immediately)
- May not be appropriate for minor children (who can't legally receive large sums directly)
For the complete picture of financial planning, see our complete guide to organizing your finances for your heirs. See also our guide on strategies for avoiding probate.