Individual, Joint, and TOD -- What the Title on Your Account Means

Why the Name on the Account Matters

Most people open a bank or investment account and never think twice about how it is titled. But the titling -- whose name is on the account and how it is registered -- determines who legally owns the money, who can access it while everyone is alive, and who gets it when someone dies. Getting this wrong can create real problems, from a surviving spouse being locked out of funds to assets going through lengthy probate when they did not have to.

Individual Accounts

An individual account has one owner. Only that person can make transactions, and if they die, the account becomes part of their estate and typically goes through probate before being distributed according to their will (or state law if there is no will). This is the simplest type of account, but it offers no automatic transfer mechanism at death unless a beneficiary designation is added.

Joint Accounts

Joint accounts are owned by two or more people. The most common type is Joint Tenants with Rights of Survivorship (JTWROS). When one owner dies, the account automatically passes to the surviving owner(s) without going through probate. Both owners have equal access to the account while alive, which means either person can deposit, withdraw, or close the account independently.

Another less common type is Tenants in Common (TIC). With this arrangement, each owner has a defined share (which does not have to be equal), and when one owner dies, their share goes to their estate -- not automatically to the other owner. TIC is more common in real estate than bank accounts but is available for financial accounts in some states.

A practical thing to be aware of with joint accounts: because both owners have full access, a joint account is sometimes used to help an aging parent manage bills. However, this can create unintended consequences. The other person's creditors may be able to access the funds, and the account may be considered a gift for tax purposes if the owners are not spouses.

Transfer on Death (TOD) and Payable on Death (POD)

TOD and POD designations are added to individual accounts to name a beneficiary who receives the account at the owner's death -- without probate. TOD is typically used for investment and brokerage accounts. POD is typically used for bank accounts. While the owner is alive, the beneficiary has no access to or claim on the account. It only transfers at death.

These designations offer a simple way to avoid probate on specific accounts without the cost of setting up a trust. They can be added or changed at any time by the account owner, usually with a one-page form at your financial institution.