TOD (Transfer on Death) designations, POD (Pay on Death) designations, and beneficiary designations can be useful in the right circumstances. Each of these tools allows for an automatic transfer to the named beneficiary at the death of the owner. But these tools can have a few shortfalls.
First, if the named person predeceases the owner, typically it will not be effective to transfer the assets. Sometimes, you could name a contingent beneficiary and then it would go to that person. But, if there is no contingent beneficiary or if they also predecease the owner, the assets may end up in the probate estate of the owner (often what the owner was trying to avoid). Sometimes the account agreement with the financial institution might specify an alternate disposition, like to the spouse or next of kin rather than the probate estate of the owner.
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