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 Dear
Tax Talk,
My wife and I have added our daughter to our stock and bank accounts as TOD (Transfer on Death) or POD (Paid on Death). What are the tax consequences on this arrangement?
-- E.D.
 Dear
E.D.,
Basically, the designation of an account as "pay
on death" to someone is a tool used to avoid
probate. It avoids the need to do a will and it
is simple and clear because it can be done when
the account is opened or at any time, for that
matter. Retirement plans and life insurance policies
are typical assets that are conveyed using the
pay-on-death designation.
POD differs from putting an account
in joint names with your child. Some people prefer
to add their children or someone else to the account
so the children or other designee will have access
to the funds should they become incapacitated.
Adding a child to an account does not necessarily
mean you're making a gift out of that account
unless that is your intention. Designating to
whom the account should be paid on your death
also does not create a gift because a transfer
will not occur until your death. The income on
the account continues to be taxable to you.
You may want to consider designating
some accounts with your daughter as joint, should
she need to access those funds during your lifetime.
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