Transfer-on-Death (TOD) Brokerage Account: How to Claim It

What a TOD Designation Is and Why It Matters

A transfer-on-death (TOD) designation on a brokerage account is a beneficiary nomination that tells the brokerage who should receive the account when the holder dies. It's the brokerage-account equivalent of a payable-on-death (POD) designation on a bank account.

During the account holder's life, the TOD designation has no effect. The beneficiary has no access, no rights, no information. The holder can change the beneficiary at any time. The designation only activates at death.

When the holder dies, the assets pass directly to the named TOD beneficiary -- bypassing the probate process entirely. The beneficiary submits a death certificate and ID; the brokerage transfers the assets to them. The transfer is typically faster, simpler, and cheaper than probate.

Most major brokerages offer TOD on individual taxable brokerage accounts:

• Fidelity
• Charles Schwab
• Vanguard
• Merrill Lynch
• Morgan Stanley
• E*Trade
• Robinhood
• Interactive Brokers
• TD Ameritrade (now part of Schwab)

(Retirement accounts like IRAs use a separate beneficiary designation system -- see inherited IRA rules in 2026.)

Step 1: Confirm the TOD Designation Exists

Before doing anything else, confirm there's a TOD beneficiary on the account. Look at:

• Recent brokerage statements (usually mentioned in fine print on the cover)
• The brokerage's online portal under "account features" or "beneficiaries"
• The original account opening paperwork

If you're not sure, call the brokerage and ask. Don't tell them about the death yet -- just ask whether a TOD beneficiary is on file. (Once you mention death, the account may be restricted before you have the beneficiary claim ready.)

If a TOD designation does exist and you're the beneficiary, proceed to Step 2. If there's no TOD designation, the account is part of the probate estate -- the executor handles it and the timeline shifts to months instead of weeks.

Step 2: Gather Documents

Standard documents required by major brokerages:

• A certified copy of the death certificate (original with embossed seal -- some brokerages will accept a notarized photocopy, but original is safer)
• Your photo ID
• Your Social Security number (for tax reporting on the new account)
• The brokerage's claim form -- typically downloadable from their website; sometimes called "transfer of assets from a deceased account holder" or similar
• Letters of testamentary not required (this is one of the key benefits of TOD)

If you already have an account at the same brokerage as the deceased, opening the inherited account in your name is faster -- they have your information on file. If you don't, you'll typically open a new account simultaneously with the claim.

Step 3: Submit the Claim

The exact process varies by brokerage but the general pattern:

At Fidelity

Call Fidelity's Estate Services line (800-544-0003). They walk you through the process and may send the paperwork via DocuSign. Online beneficiary claims are now supported for many TOD accounts -- check Fidelity.com/transferproof for the latest process.

At Schwab

Call Schwab's Estate Services team (800-435-4000). They send a "Beneficiary Distribution Form" and a packet explaining the options (in-kind transfer, sell and transfer cash, partial transfer). The form is completed and submitted with the death certificate.

At Vanguard

Call Vanguard (800-523-7731) and ask for the estate services team. Vanguard has historically been slower than Fidelity or Schwab for inheritance claims -- expect 3 to 6 weeks. They use mailed forms more than electronic processes.

At Other Brokerages

Find the contact for "Estate Services" or "Deceased Account Holder" on the brokerage's website. The process is similar everywhere: claim form + death certificate + ID = transfer.

Step 4: Choose How to Receive the Assets

When you submit the claim, the brokerage typically gives you choices for how to receive the inherited assets:

Option A: In-Kind Transfer

The actual securities transfer to your account intact. If your parent owned 100 shares of Apple, you receive 100 shares of Apple. No sale, no immediate tax event. Your cost basis is the fair market value on the date of death (the stepped-up basis -- see below).

This is usually the right choice unless you have a specific reason to liquidate.

Option B: Sell and Transfer Cash

The brokerage sells the holdings and transfers the cash proceeds. You receive cash equal to the value at the time of sale (which may differ from the date-of-death value if markets moved).

This option makes sense if:

• You want to immediately diversify or invest elsewhere
• The deceased held proprietary mutual funds that won't transfer to your preferred brokerage
• You need the cash for estate expenses or distributions to other heirs

Note: selling triggers a capital gains tax event on any gain or loss between the date-of-death basis and the sale price. Because of the stepped-up basis, the gain is usually small if you sell soon after inheriting.

Option C: Partial Transfer

Some brokerages let you split the inheritance: some holdings in-kind, others sold and cashed out. Useful when you want to keep some positions but liquidate others.

The Stepped-Up Basis Rule: Why It Matters

Of all the tax rules that affect inheritance, the stepped-up basis is the most generous. Here's how it works:

Without Stepped-Up Basis

If your parent bought 100 shares of Apple at $20/share (cost basis $2,000) and the price was $200/share at their death (market value $20,000), and you sold immediately for $20,000:

• Without stepped-up basis: you'd pay capital gains tax on $18,000 of gain
• Federal long-term capital gains rate is 15% to 20% depending on your income
• Tax: $2,700 to $3,600

With Stepped-Up Basis (Actual Rule)

The basis "steps up" to the fair market value on the date of death:

• Your basis is $20,000 (the date-of-death value)
• You sell for $20,000
• Capital gain: $0
• Tax: $0

The pre-death appreciation is never taxed. Your parent didn't owe tax on it (they didn't sell during their life), and you don't owe tax on it (because your basis got reset). The capital gain disappears for tax purposes.

Practical Implications

• Don't sell pre-death. If your parent is considering selling appreciated stock late in life to "simplify" the estate, don't. Selling triggers capital gains tax for them. Holding until death lets the gain disappear.
• Don't gift appreciated assets during life. Gifts carry the giver's basis. Inheritance carries a stepped-up basis. For appreciated assets, inheritance is much more tax-efficient than lifetime gifting.
• Document the date-of-death value. Get a statement from the brokerage showing the value on the date of death (or use the average of high/low prices on that date for thinly-traded securities). Keep this for when you eventually sell.

For Joint and Community Property

For jointly held accounts:

• Joint with right of survivorship (non-community-property states): Half of the account receives stepped-up basis (the deceased's half); the survivor's half retains its original basis.
• Community property (community property states): Both halves of the account receive stepped-up basis. This is one of the major financial advantages of community property.

Multiple TOD Beneficiaries

TOD designations can name multiple beneficiaries with specified percentages. For example: "60% to my daughter, 30% to my son, 10% to my granddaughter."

Each beneficiary claims their share independently:

• Each submits their own claim form and death certificate
• The brokerage divides the assets proportionally
• For in-kind transfers, the brokerage allocates whole shares as evenly as possible and any odd fractional shares are sold and the cash proportionally distributed
• One beneficiary's delay doesn't block the others

If one of the named beneficiaries has died before the account holder, what happens to their share depends on the TOD agreement:

• "Per stirpes" designation: The deceased beneficiary's share passes to their children/descendants
• "Per capita" or default: The deceased beneficiary's share is divided among the surviving beneficiaries
• No surviving beneficiaries: The account falls back into the probate estate

What If the Holdings Won't Transfer In-Kind?

Some securities can't transfer between brokerages:

• Proprietary mutual funds -- A Vanguard fund typically can't be held in a Fidelity account, and vice versa. If you want to keep the assets, you may need to open an account at the same brokerage.
• Certain options or futures -- May need to be liquidated at the deceased's brokerage if your brokerage doesn't support them.
• Old certificate shares -- Paper share certificates from before electronic registration may need to be re-registered in your name through the issuing company's transfer agent. This is slow (months) but the brokerage will explain.
• Restricted securities -- Stock with restrictions (like Rule 144 stock from an employee plan) may have additional requirements.

For most positions (publicly traded stocks, bonds, ETFs, mutual funds widely available at multiple brokerages), in-kind transfer to any major brokerage is straightforward.

Tax Reporting in the Year of Death

The year of death is a transition year for tax reporting. Two 1099s typically get issued:

• One under the deceased's SSN -- for dividends, interest, and capital gains/losses up to the date of death. These are reported on the deceased's final 1040.
• One under the beneficiary's SSN (or estate EIN) -- for income from the date of death forward. Reported on the beneficiary's personal return or the estate's Form 1041.

The brokerage handles this split automatically if you complete the claim before year-end. If the claim isn't completed until the following year, you may receive a single 1099 under the deceased's SSN for the entire year, and you'll need to allocate income between the final 1040 and your personal return manually.

Notify the brokerage of the date of death even before completing the claim to help them split the tax reporting correctly.

When You Don't Want the Inheritance

If you've inherited a TOD brokerage account but don't want the assets (for example, you want them to go to your sibling instead), you have two options:

Option A: Disclaim the Inheritance

A "qualified disclaimer" under federal tax law lets you formally refuse the inheritance within 9 months of the date of death. The assets then pass as if you had predeceased the account holder -- typically to the next named beneficiary or back into the probate estate.

Requirements:

• Must be a written, irrevocable refusal
• Must be made within 9 months of death
• You must not have benefited from the assets
• The assets must pass without any direction from you

Use cases:

• You don't want or need the inheritance
• The assets would push you into a higher tax bracket
• You want the inheritance to pass to children or other heirs without going through your estate first

Option B: Accept and Then Gift

You can accept the inheritance and then gift the assets to whoever you'd prefer to have them. Downsides:

• You're treated as the giver, so gift tax rules apply (federal annual exclusion is $19,000 per recipient in 2026; above that requires a gift tax return)
• The recipient gets your cost basis (which is the stepped-up basis from when you inherited), so it's not necessarily worse than disclaiming, depending on the asset

Talk to a tax advisor before disclaiming or gifting significant inherited assets -- the optimal approach depends on the size of the inheritance, your tax situation, and the recipient's situation.

Common Mistakes

• Selling immediately without considering basis. The stepped-up basis can save thousands. Even if you plan to liquidate eventually, holding for a few months while you decide doesn't hurt and gives you flexibility.
• Closing the account at the wrong brokerage. If you want to keep the holdings, opening an account at the same brokerage as the deceased is usually faster than transferring out to a different one.
• Missing the disclaimer window. If you might want to disclaim, the 9-month clock starts on the date of death and is strict. Decide early.
• Forgetting to update tax reporting. Without notifying the brokerage of the date of death, 1099s may continue under the deceased's SSN for the full year, complicating tax filing.
• Letting the assets sit in cash. If you sold the inherited holdings and the cash is sitting in the new account earning nothing, reinvest based on your goals. Don't let market value erode just because you inherited cash you didn't plan for.

How SwiftProbate Can Help

TOD brokerage claims are relatively simple compared to probate, but they're one of many financial moves to coordinate after a death. SwiftProbate's checklist prompts you to inventory all the deceased's brokerage accounts, identify which have TOD designations (and which don't), and walks through the claim process. We also flag the stepped-up basis to make sure you don't sell at the wrong time and trigger avoidable taxes.

This article is for informational purposes only and is not legal advice. Consult a qualified financial advisor or tax professional for guidance specific to your situation.