Why TOD Accounts Aren’t the Estate Plan You Think They Are
- Law Office of Arij H. Syed
- Nov 6
- 3 min read
Banks often reassure clients that opening a TOD (Transfer on Death) account is a simple way to avoid probate.
It sounds appealing — quick, inexpensive, and paperwork-free.
But the truth is more complicated.
After years of helping families navigate estate issues here in New Jersey, I’ve seen TOD and joint ownership arrangements create far more problems than they solve. They’re marketed as “easy planning,” but they often leave families stuck with delays, court involvement, and expensive mistakes.
Before you rely on a TOD account, here’s what you need to know.
✅ 1. If Your Beneficiary Passes First, Everything Goes Through Probate Anyway
A TOD account only works if the named beneficiary survives you.
If they pass away first — and you don’t update the designation — the account is treated like any other probate asset.
Most people don’t remember to update their forms after life changes, which means their “probate-free” plan isn’t probate-free at all.
✅ 2. TOD Accounts Give Young or Vulnerable Beneficiaries Unrestricted Access
A TOD account transfers the entire balance immediately and without conditions.
This means:
An 18-year-old receives full control with no guardrails
Someone with special needs may lose essential benefits
A beneficiary with financial struggles can burn through the funds within weeks
There’s no protection, staging, or oversight.
✅3. TOD Designations Don’t Handle Your Final Expenses
Even if the account transfers smoothly, TOD arrangements don’t answer key questions like:
Who covers funeral expenses?
Who pays your last medical bills?
Who files final tax returns?
A TOD avoids none of the administrative work involved in settling an estate — it simply sidesteps the planning piece.
✅ 4. Multiple Beneficiaries = Delays and Disagreements
When several children are listed as TOD beneficiaries, the financial institution typically requires all of them to sign off on transactions.
If one lives far away, doesn’t respond, or disagrees with the others, the account can be tied up indefinitely.
Families regularly end up fighting over decisions that could have been avoided with a properly structured plan.
✅ 5. TOD Accounts Offer Zero Help If You Become Incapacitated
A TOD designation does nothing if you’re alive but unable to manage your finances.
Your family may still need:
A guardianship hearing
Court approval to access funds
Weeks or months of delays when they need money urgently
TOD only activates at death. It provides no protection during a medical crisis.
🚨 Why Joint Ownership Creates Even Bigger Risks
Many people add a child to their account “for convenience.”
This is one of the most common — and dangerous — estate planning shortcuts.
When you add someone as a joint owner:
They instantly have legal access to all your money
Your assets become vulnerable to their creditors, lawsuits, and divorces
You may unintentionally disinherit your other children
You could trigger avoidable tax issues
A real example:
A client added her son to her checking account so he could help pay bills.
When he went through a divorce, his estranged spouse emptied the account.
The client lost every dollar.
This risk is very real — and completely preventable.
✅ A Better, Safer Answer: A Revocable Living Trust
A properly drafted revocable living trust solves every issue highlighted above.
With a trust, you control:
Who inherits
When they inherit
How funds may be used
Who pays your final expenses
Who manages your affairs if you become incapacitated
You avoid probate, maintain privacy, prevent family conflict, and protect your beneficiaries (including minors and special needs family members).
A trust is not just about distributing assets — it’s about giving your family structure, clarity, and support when they need it the most.
✅ Protect Your Family With a Real Plan
At Arij Syed Law, we help New Jersey families build estate plans that work in real life — not just on paper.
If you want:
✔ A plan that avoids probate
✔ Protection for your children
✔ Better options than TOD or joint ownership
✔ Peace of mind knowing everything is handled correctly
We’re here to help.
Schedule a consultation at:
Your legacy deserves more than a shortcut — it deserves a plan designed for your family.
Comments