These are ordinary financial accounts of various types, for which the owner fills out a form to name a beneficiary (payee). The payee automatically receives the account balance on the death of the owner. Until then, the beneficiary/payee has no rights in the account, since the beneficiary can be changed, or the account depleted or closed.

US Treasury obligations (e.g., Treasury bills) can be held with a "payable on death" (POD) designation. Many states have also adopted a "transfer on death" (TOD) law pertaining to stock brokerage accounts that works in the same way that the POD arrangement does. Upon proof of the account owner's death, the brokerage transfers his or her account to the designated beneficiary outside of probate.

There appears to be no reason why a state law would be necessary to allow a customer to make a TOD arrangement with a financial institution. Therefore, your brokerage company might be willing to hold your account in TOD form if it does so in other states, even if your state does not expressly authorize it by statute. While payable-on-death and transfer-on-death accounts avoid probate, neither avoids including its values in the federal estate tax computation.

A wide variety of accounts can be held in POD or TOD form. While it saves no tax, this is a timesaving and probate-avoiding option to consider.