A client once came to my Manhattan office with a will his father had meticulously updated just six months before his death. The will was clear: all assets were to be divided equally between our client and his sister. The problem? The largest asset, a multi-million dollar brokerage account, never made it into the estate. Fifteen years earlier, his father had named the sister as the sole “Transfer on Death” beneficiary on that account. The will was irrelevant for that asset—the sister inherited it all, directly and immediately.
This happens more often than people think. Transfer on Death (TOD) or Payable on Death (POD) designations are powerful tools, but they operate outside of your will. They are simple contracts with a financial institution. When you die, the asset passes directly to the named person, bypassing the Surrogate’s Court entirely. While this avoids the time and expense of probate, it can create unintended consequences if not managed with care.
The Limits of TOD in New York
In our practice, we see TOD and POD designations on a range of financial accounts: checking and savings accounts, investment and brokerage accounts, and retirement funds like IRAs and 401(k)s. They are effective for transferring liquid assets quickly and privately.
You must understand, however, what you cannot do with this tool in New York. While many states permit “TOD deeds” for real estate, allowing property to pass to a beneficiary without probate, New York is not one of them. You cannot use a TOD deed to transfer your Brooklyn brownstone or your Long Island home. Any attempt to do so is invalid. For real property, we must use other structures—like a trust or specific forms of joint ownership—to avoid probate.
Relying on misinformation about TOD deeds creates a false sense of security, leaving your most valuable asset exposed to the public and often lengthy process of probate administration in Surrogate’s Court.
When a TOD Designation Overrides Your Will
A beneficiary designation on an account is a contract. It supersedes your Last Will and Testament. Your will controls probate assets, but a TOD account is a non-probate asset. It never becomes part of the estate administered by your executor.
This is why the client I mentioned earlier faced such a difficult situation. His father’s will expressed a clear wish for a 50/50 split, but an old, forgotten account form from a decade prior overrode that final wish. Life changes—divorce, remarriage, the birth of children, or a falling out—but beneficiary designations often remain untouched. People update their wills but forget to review the paperwork filed away at their bank or brokerage firm.
Stewardship. That’s what this is about. It’s the intentional and deliberate act of ensuring all parts of your plan work in concert. A will is one part. A trust is another. And your beneficiary designations are a third, equally important component. If they conflict, your legacy may not unfold as you intended.
The Law Recognizes These Transfers
These non-probate transfers have firm standing in New York law. For example, New York’s Estates, Powers and Trusts Law (EPTL) directly addresses certain types of POD bank accounts. Specifically, EPTL § 7-5.2 governs what are often called “Totten trusts”—simple trust accounts where the funds are payable to a beneficiary upon the depositor’s death. The law provides a clear mechanism for how these accounts function and can be revoked or modified.
This statutory backing gives beneficiary designations their power. They are not an informal instruction; they are a legally recognized method of transferring assets. This means these designations cannot be an afterthought. They must be an integral part of any prudent estate plan, reviewed regularly alongside your will and any trusts.
An outdated designation is not just a clerical error; it is a potential source of family conflict and a distortion of your final wishes. The law will uphold the contract you signed with the financial institution, regardless of what a more recently drafted will might say.
Your legacy deserves careful and consistent attention. If you are unsure whether your account designations align with your will, the first step is a comprehensive audit. We often begin a client relationship by conducting a beneficiary designation review to identify and correct any legacy-disrupting conflicts before they become a problem for the next generation.
