Estate Planning & Probate
TOD, POD, and Joint Accounts in Pennsylvania: What Passes Outside Your Will
Under Pennsylvania law, property that passes through a TOD account, POD designation, or joint account passes directly to the named beneficiary or surviving co-owner outside the will. The beneficiary or surviving owner is generally responsible for the Pennsylvania inheritance tax attributable to that transfer. The executor must still report the asset on the inheritance tax return and may be left addressing the consequences if the tax is not paid.
Lebovitz & Lebovitz, P.A. advises Pittsburgh and Western Pennsylvania families and estates on how transfer-on-death designations, payable-on-death accounts, and jointly held property interact with wills, trusts, and Pennsylvania inheritance tax. These mechanisms are widely used and widely misunderstood. The problem is usually not the document itself. The problem is that beneficiary designations, joint titles, and estate documents were never reviewed together.
Beneficiary designations and survivorship rules override your will. A TOD account that names one child passes entirely to that child even if your will says everything should be divided equally.
These transfers may avoid probate, but they do not avoid Pennsylvania inheritance tax. For a broader overview, see our Estate Planning hub. For related tax issues, see Pennsylvania inheritance tax.
How Transfer-on-Death and Payable-on-Death Designations Work
A payable-on-death designation on a bank account allows the balance to pass directly to the named beneficiary at the account holder’s death without going through probate. A transfer-on-death designation works the same way for brokerage and investment accounts. The beneficiary presents a death certificate to the financial institution and receives the funds. The executor has no authority over that account, and the will has no effect on who receives it.
POD and TOD designations are easy to establish and even easier to forget. A designation made when an account was opened years ago may still name an ex-spouse, a deceased sibling, or one child when equal distribution was later intended. The designation on file at death controls. The institution does not look to the will for a different answer.
Who Gets the Money and Who Pays the Tax
The beneficiary named on the account gets the money. The bank or brokerage firm usually releases the funds directly to that beneficiary after receiving the required paperwork. The executor does not control that transfer and cannot redirect it simply because the will says something different.
The tax question is separate. Pennsylvania inheritance tax still applies based on the relationship between the decedent and the person receiving the asset. The beneficiary who receives the TOD or POD account is generally responsible for the tax attributable to that transfer. The institution pays out the account first. The tax obligation follows afterward. For a full explanation of how liability and payment interact, see our Who Pays Pennsylvania Inheritance Tax page.
Joint Accounts and Joint Tenancy With Right of Survivorship
A joint account with right of survivorship passes entirely to the surviving account holder at death. This is true regardless of who contributed the funds and regardless of what the will says. A parent who adds an adult child to an account for convenience may unintentionally leave that entire account to that child while the other children receive nothing from that asset.
Joint tenancy with right of survivorship works the same way for real estate. When title is held in that form, the surviving owner takes the property automatically at death. No probate is required for that transfer, and the will does not control it. A title decision made years earlier can therefore override a later estate plan.
Tenancy by the Entirety in Pennsylvania
Pennsylvania recognizes tenancy by the entirety for married couples. Property held by the entirety belongs to both spouses as a single legal unit. At the death of one spouse, the surviving spouse takes full ownership automatically. During life, neither spouse can transfer or encumber the property without the other’s consent.
Entireties ownership also carries asset protection consequences during life because a creditor of only one spouse generally cannot reach entireties property to satisfy that spouse’s individual debt, subject to narrow exceptions. At the first death, that protection disappears when the surviving spouse becomes sole owner. Planning for the second death matters just as much as planning for the first.
Pennsylvania Inheritance Tax on Accounts Passing Outside Probate
Accounts and property that pass outside probate through beneficiary designations or survivorship rights are still subject to Pennsylvania inheritance tax. The tax rate depends on the relationship between the decedent and the person receiving the property. A TOD brokerage account passing to a sibling is taxed at 12 percent. A joint account passing to an unrelated co-owner may be taxed at 15 percent. The tax is based on the date-of-death value and is generally due nine months after death.
Transfers to a surviving spouse are exempt. The REV-1500 inheritance tax return still requires these non-probate transfers to be reported. Executors who assume that assets passing outside the estate can be ignored on the return create avoidable exposure for tax, interest, and penalties.
What Happens When the Beneficiary Does Not Pay
The practical problem is easy to see. A beneficiary receives a TOD or POD account directly, spends the funds, and then ignores the inheritance tax obligation. The executor still has to file the inheritance tax return and account for the transfer. The executor may then face pressure from other beneficiaries or from the estate administration process to resolve a tax problem tied to money the executor never controlled.
Pennsylvania law gives the executor a right of contribution against beneficiaries who received taxable assets, but that does not make collection easy. It may require separate legal action. The better approach is prevention: reviewing the designations before death, making sure the plan is coordinated, and making sure the people involved understand what obligations follow the transfer.
Transfer-on-Death Deeds for Pennsylvania Real Estate
Pennsylvania allows transfer-on-death deeds for real estate. A properly recorded TOD deed names a beneficiary who receives title at death without probate. During life, the owner keeps full control and may revoke the deed, sell the property, or mortgage it.
That convenience does not eliminate tax or title issues. The beneficiary takes the property subject to existing liens and encumbrances, and Pennsylvania inheritance tax still applies to the date-of-death value. If the property is later sold, unpaid inheritance tax can become a title problem that must be resolved before closing.
Coordination Is the Step Most Estate Plans Miss
The most common estate planning failure is not the absence of a will. It is a will that was drafted carefully while account titles, beneficiary designations, TOD instructions, and jointly held assets were never coordinated with it. A will controls only the assets that actually pass through the estate. If most of the wealth passes by beneficiary designation or survivorship, the will may govern far less than the family assumes.
A complete review means listing every account, every titled asset, and every beneficiary designation and making sure each one matches the current plan. Without that coordination, the law of account registration and beneficiary designation may control more than the will you thought governed everything.
Frequently Asked Questions
Does a TOD or POD account avoid Pennsylvania inheritance tax?
No. TOD and POD accounts pass outside probate, but they are still subject to Pennsylvania inheritance tax based on the relationship between the decedent and the beneficiary.
Does a beneficiary designation override a will in Pennsylvania?
Yes. A valid beneficiary designation on an account or policy controls that transfer even if the will says something different.
What happens to a joint account when one owner dies in Pennsylvania?
A joint account with right of survivorship usually passes entirely to the surviving account holder outside probate and outside the will.
Who is responsible for paying Pennsylvania inheritance tax on a TOD or POD account?
The beneficiary who receives the account is generally responsible for the inheritance tax attributable to that transfer, even though the executor still has to report the asset on the inheritance tax return.
Does the bank withhold inheritance tax before releasing a TOD or POD account?
No. The institution usually releases the funds to the beneficiary and does not withhold Pennsylvania inheritance tax first.
What is tenancy by the entirety in Pennsylvania?
Tenancy by the entirety is a form of ownership available only to married couples in which the surviving spouse automatically takes full ownership at the first death.
Can a transfer-on-death deed avoid probate on Pennsylvania real estate?
Yes. A TOD deed can transfer real estate outside probate, but it does not avoid inheritance tax or existing liens on the property.
What happens if Pennsylvania inheritance tax on a TOD deed goes unpaid?
Unpaid inheritance tax can create a lien problem that affects title and may have to be resolved before the property can be sold or refinanced.
What if the named beneficiary dies before the account holder?
If no contingent beneficiary is named, the asset may pass to the estate and go through probate instead of passing directly outside the will.
Should joint accounts and beneficiary designations be reviewed with the estate plan?
Yes. A will, trust, beneficiary designation, and account title should be reviewed together so the overall plan works the way the client intends.