Brokerage Accounts and Transfer-on-Death Securities

How TOD registration works

A transfer-on-death registration lets the owner of a security or a securities account name someone to receive it at death without probate. This guide uses Minnesota’s version of the uniform act as its example. Other states’ versions may differ in important details, including the will rule below.

• Who can register. Only individuals who own a security alone, or jointly with right of survivorship, “may obtain registration in beneficiary form.” Tenants in common cannot.¹
• Firms are not required to offer it. “A registering entity is not required to offer or to accept a request for security registration in beneficiary form.”²
• It is a contract. A TOD transfer “is effective by reason of the contract regarding the registration” and the statute, “and is not testamentary.”³

Can a will override a TOD registration?

As a general rule, a will does not change a beneficiary designation. See change of beneficiary. Minnesota’s statute contains an important exception for securities. A TOD registration “may be canceled by specific reference to the security or the securities account in the will” of the sole owner or the last surviving joint owner. But that cancellation “is not binding on the registering entity unless it has received written notice from any claimant … objecting to implementation” before it reregisters the security.³

In practice, an estate that wants to rely on such a will needs to notify the firm in writing promptly. Once a firm has that notice, it is no longer protected if it simply transfers the account to the named beneficiary.

The firm’s protection, and why accounts freeze

A registering entity “is discharged from all claims to a security by the estate, creditors, heirs, or devisees of a deceased owner” if it registers the transfer as the statute provides and in good faith reliance on the registration, the statute, and the information given to it.² Once it has notice of a competing claim, good faith reliance becomes uncertain, so firms commonly hold the account until the parties agree or a court decides. See how a claim freezes payment.

Creditors

The statute “do[es] not limit the rights of creditors of security owners against beneficiaries and other transferees under other laws of this state.”³ An estate with unpaid debts may therefore seek to reach TOD assets in some circumstances.

Divorce

Many states revoke beneficiary designations in favor of a former spouse when a marriage ends. Minnesota’s statute provides that, unless a governing instrument, court order or property settlement says otherwise, divorce or annulment “revokes any revocable … disposition, beneficiary designation, or appointment of property made in a governing instrument by an individual to the individual’s former spouse” or the former spouse’s relatives.⁴ Minnesota defines “governing instrument” to include a “security registered in beneficiary form (TOD).”⁵ So a TOD registration naming a former spouse is generally treated as if the former spouse had died first, and the account passes to the contingent beneficiary or the estate.

The rule has limits. A divorce decree or settlement can preserve the designation, and the outcome can turn on its exact words. The statute also does not govern employer retirement plans subject to ERISA. See divorce and beneficiary designations.

Conflicting or altered TOD forms

Disputes also arise from the paperwork itself. A firm may receive two designation forms with the same date, a form with handwritten changes, or a form signed shortly before death by someone whose capacity is questioned. The firm cannot tell which document reflects the owner’s final wishes, and paying on the wrong one exposes it to a second claim. These are classic interpleader facts. See undue influence and capacity. For a case where a TOD change six weeks before death was challenged as forged after the firm had already distributed the account, see Raymond James v. Medina below.

Incomplete paperwork causes the same problem. In a Texas complaint, a mutual fund company alleged that the owner named one relative as TOD beneficiary in 2011, and in 2013 sent a new TOD form naming a different relative, but not the new-account registration form needed to complete the change; she had sent “half of the paperwork,” and the new form misstated the beneficiary’s birthdate. The company said it tried repeatedly to reach her, without success, and she died about two months later. It described three possible readings: the 2013 form failed, so the 2011 beneficiary takes; it worked, so the newer beneficiary takes; or it canceled the 2011 designation without completing a new one, so the shares pass through her estate.⁶ complaint (PDF)

Timing can matter as much as the form. In a Tennessee complaint, a brokerage firm alleged that a terminally ill customer called to say he wanted to move the beneficiaries of his IRAs and TOD account from the original beneficiary to two of his siblings. A relative picked up change forms and returned them completed at about 11 a.m. the next day. About an hour later, the firm learned the customer had died. One IRA held only an annuity issued by an outside insurer, for which the customer had never returned beneficiary paperwork, so the firm named that insurer as well. Citing “the drastic change in beneficiaries requested and effected by Decedent (with the assistance of his family) near the end of Decedent’s life,” the firm asked the court to decide.⁷ complaint (PDF)

Other reasons a firm may hold an account

Not every freeze comes from a beneficiary dispute.

• Suspected financial exploitation. FINRA Rule 2165 lets a member firm place a temporary hold on a disbursement of funds or securities from the account of a “Specified Adult” (generally a customer aged 65 or older, or an adult the firm reasonably believes has a mental or physical impairment) if the firm “reasonably believes that financial exploitation … has occurred, is occurring, has been attempted, or will be attempted.” The firm must give notice within two business days. The hold expires within 15 business days unless extended under the rule, by a state regulator or agency, or by a court. The rule allows a further 10 business days, and longer extensions if the firm has reported the matter to a regulator, agency or court.⁸
• Legal process. A restraining notice, levy, garnishment or court order directed to the account requires the firm to comply with it, whatever the account owner wants.
• Estate administration. A firm may require letters testamentary, a death certificate and tax waivers before it reregisters securities.

A Rule 2165 hold is meant to be short. If the underlying dispute survives the hold, interpleader or a court order is the usual way forward.

Cash or securities: what gets deposited?

Brokerage accounts usually hold securities, not just cash, and that raises a practical question when a firm interpleads. The interpleader statute allows the holder to deposit “money or property,” or to give a bond instead.⁹ Securities can in principle be deposited in kind or simply restricted in place, and liquidating them can trigger tax and market consequences that some claimants would prefer to avoid.

Firms’ complaints often propose alternatives to a full deposit. In the Texas mutual fund case described above, the company said the shares were “difficult to place into the Court’s registry directly” and asked for a “minimal bond of $500.”⁶ In the Tennessee case, the firm asked to deposit the assets or, alternatively, for an order “restricting the [accounts] as to transfers or withdrawals” until the claimants gave joint instructions or the court ruled.⁷

Courts do not always agree to leave the account as it is. In the Maryland case below, the firm asked the court to let it keep the accounts “as is,” restricted pending further order, because of tax-withholding concerns. The court noted that Rule 22 does not itself require a deposit. But because the firm wanted the protections of statutory interpleader, including discharge and an injunction against other suits, the court construed the request as statutory interpleader and directed the firm to deposit the funds, with interest since the filing date, in the court’s registry.¹⁰

A bond is the statute’s other option, but a token bond may not be enough. In a New York IRA case described below, the firm asked to keep managing the accounts and post a $1,000 bond. The court refused, finding no Second Circuit case allowing “a party to satisfy the deposit requirement by posting a nominal bond,” and noting that some courts in the circuit require a bond “for the highest amount that may be in dispute.” It also rejected the objecting claimants’ proposal to move the money to a third-party investment account, because “to invoke the Court’s jurisdiction, Raymond James must either deposit the funds into the registry of the Court or post an appropriate bond.”¹¹ The firm then asked to liquidate the accounts and deposit the cash, and the court granted that request.¹² In an Alabama TOD case, also described below, the court likewise questioned a proposed bond of $1,000 on an account worth about $10.25 million, then set the bond at $90,000 rather than requiring the whole account to be deposited.¹³¹⁴

Claimants who care about keeping particular securities, or about the tax timing of a sale, should raise it early, before the court orders liquidation and deposit.

A federal example: Morgan Stanley v. Carter-McReynolds (D. Md. 2026)

An account owner held four Morgan Stanley accounts, “comprised primarily of equities and cash,” worth about $820,000 in 2024. In January 2021 the firm received two TOD beneficiary forms, both signed by her on the same day. One named her three grandchildren. The other named her two children in equal shares. Both forms had account numbers crossed out next to handwritten initials, and one also carried the handwritten word “grandkid.” After she died in 2023, the firm said it could not tell which form superseded the other. The court took these facts from the firm’s complaint, accepted as true at that stage. One of the children separately wrote to the court asserting that the owner had lacked capacity because of Alzheimer’s disease.¹⁰

In an August 14, 2026 memorandum opinion, the court:

• found jurisdiction under both Rule 22 and the interpleader statute, and held that the firm’s failure to deposit the funds yet was a curable defect;
• treated the four accounts as a single fund because they formed one portfolio;
• found that the grandchildren and the children were adverse claimants, so the firm faced multiple liability;
• directed deposit of the funds with interest, after which the firm would be discharged and the claimants barred from suing it over the accounts;
• denied default judgment against claimants who had not answered, because that belongs in the second stage of the case, where the claimants litigate entitlement; and
• held the firm entitled to reasonable fees and costs for its role as stakeholder, subject to a breakdown separating fees from costs. It rejected an argument that the firm had caused the dispute, finding that “the competing claims arising from conflicting beneficiary designation forms” made interpleader necessary.¹⁰

The court has not yet decided which form controls. For how fees are usually limited in these cases, see discharge, fees, and interest.

A federal example: Raymond James v. Ellison (W.D.N.Y.)

This case involved two IRAs held at a brokerage firm, not TOD accounts, but it shows how a rejected form and the custodial agreement’s default rule can lead to interpleader, and what a court may require before it lets the firm out.

The complaint’s allegations. The following are the firm’s allegations, not findings by the court. The account owner opened two IRAs in May 2018 and named no beneficiary. The IRA agreement provided that if “no designation is otherwise in effect as of the time of a Depositor’s death, the Beneficiary of the Depositor’s Custodial Account shall be deemed to be the Depositor’s surviving spouse, if married,” and otherwise the estate. In June 2020 the firm received a change form for one of the accounts that the owner had signed in October 2018, about 20 months earlier. It named five primary beneficiaries: the owner’s nephew, two brothers, a niece and a cousin. According to the complaint, Social Security numbers were missing for four of them, a birth year was missing for one, and the nephew’s percentage “had been changed.” The names of a sister and another brother were “handwritten below empty boxes” for contingent beneficiaries. The owner’s husband had signed the form’s spousal-consent section. The firm “rejected the Beneficiary Form because that form was outdated and, by June 2020, Raymond James used an updated version of the form,” and says it told the owner “on multiple occasions” that new paperwork was needed. None arrived before she died in May 2021. The firm alleges that under the IRA agreement the surviving spouse would be the beneficiary, while relatives named on the rejected form claimed the accounts, including in the estate proceeding in Ontario County Surrogate’s Court. The accounts were worth about $464,000 at the death and, the firm said, “remain active accounts under management.” Rather than deposit the money, the firm offered “to give bond payable to the clerk of the Court in such amount and with such surety as the Court deems proper.”¹⁵ complaint (PDF)

What the court decided. In August 2024 the court denied the firm’s request to post a $1,000 bond while keeping the accounts, for the reasons above, but allowed a renewed motion.¹¹ In November 2025 the court granted interpleader relief and directed the firm to deposit the account value, with interest from August 30, 2024, after which it would be discharged. It found that “each side argues that they, and not other parties, are the proper beneficiaries to a single identifiable stake.” It declined the broad injunction the firm sought, because the objecting claimants contended the firm might be liable to them for its administration of the accounts and the firm had not shown otherwise, and it denied attorneys’ fees as costs incurred “in the normal course of business.”¹² As of the most recent rulings reviewed, the court had not decided whether the rejected form or the agreement’s spousal default controls.

A federal example: Raymond James v. Medina (N.D. Ala. 2026)

The complaint’s allegations. The following are the firm’s allegations. The owner opened a TOD brokerage account in 2007 that held “primarily equities and cash” and was worth about $10.25 million as of September 30, 2025. In August 2023 he signed a TOD agreement leaving the account 40%, 40% and 20% to three people. On August 4, 2025 he signed a new TOD agreement leaving it 70%, 10%, 10% and 10% to four people. Only one person was named in both, and that person’s share fell from 20% to 10%. The owner died about six weeks later, on September 17, 2025. The firm “acted on the 2025 TOD,” transferring the account by those percentages, and “[a]ll of the funds were transferred to other accounts held at Raymond James.” It let the beneficiary named in both forms withdraw 10%, the minimum that person would receive under either form. Afterward, one of the two beneficiaries dropped by the 2025 form emailed the firm disputing it, “claiming forgery, undue influence, coercion, and manipulation.” The firm said it would “move for leave to liquidate the funds previously held in the Account and deposit the total funds at issue into the Registry of the Court,” and it asked for its attorneys’ fees.¹⁶ amended complaint (PDF)

What the court decided. The firm first sued only the four 2025 beneficiaries, then amended three days later to add the two people named only in 2023. In April 2026 the court held that the firm had not met the deposit-or-bond requirement, and it directed the firm and the 2025 beneficiaries to explain why the full amount could not be deposited and what authority supported a bond “in the minuscule amount of $1,000.”¹³ It then ordered a $90,000 bond. The firm posted it in May 2026 and was discharged from liability to the claimants on that deposit.¹⁴

On the merits, the beneficiary named in both forms answered that he did not dispute the 2025 form and claimed only 10%. The 2025 beneficiaries filed cross-claims asking the court to declare the 2025 form valid, and the other person dropped in 2025, in a late answer to the cross-claims, said she did not contest it. The challenger was personally served but did not answer, and a default was entered. About three months after service she moved to set it aside, citing a family death. The court denied the motion. It found no good cause and no meritorious defense, because she said only that she disputed the change and offered no facts; “the movant must present a factual basis for [her] claim.” The court entered a default judgment, and held that she had forfeited any claim to the account. It granted judgment on the pleadings against the other two, adopting the 2025 beneficiaries’ statement of the law, and held that the 2025 TOD agreement “is the operative designation of beneficiaries.” The firm’s fees, which the 2025 beneficiaries did not oppose, were to be set later and taken from the accounts. The forgery and undue influence allegations were never tested on evidence.¹⁴ memorandum opinion (PDF); see also Key decisions

Questions that often decide brokerage disputes

• Was the registration properly made, and in what form of ownership?
• Does the will specifically refer to the account, and did anyone notify the firm before reregistration?
• Is there a divorce, slayer, or undue influence issue? See beneficiary disputes.
• Are there two or more designation forms, or handwritten changes, and which came last?
• Should the securities be sold before deposit, or held in kind, and who bears the tax and market risk?
• Is this actually an employer retirement plan or IRA, which follows different rules? See retirement accounts.

Footnotes

1. Minn. Stat. § 524.6-302. Minnesota Revisor of Statutes. ↩

2. Minn. Stat. § 524.6-308(a), (c). Minnesota Revisor of Statutes. ↩ ↩²

3. Minn. Stat. § 524.6-309. Minnesota Revisor of Statutes. ↩ ↩² ↩³

4. Minn. Stat. § 524.2-804, subd. 1. Minnesota Revisor of Statutes. ↩

5. Minn. Stat. § 524.1-201(27). Minnesota Revisor of Statutes. ↩

6. Complaint for Interpleader and/or Declaratory Relief ¶¶ 14–24, USAA Investment Management Co. v. Hibler, No. 4:16-cv-01049 (N.D. Tex. filed Nov. 16, 2016), ECF No. 1. Allegations only. ↩ ↩²

7. Complaint in Interpleader ¶¶ 10–18, 21 & Prayer ¶ 2, Stifel, Nicolaus & Co. v. Estate of Campbell, No. 2:21-cv-00057 (E.D. Tenn. filed Mar. 17, 2021), ECF No. 1. Allegations only. ↩ ↩²

8. FINRA Rule 2165(a)–(b). FINRA. ↩

9. 28 U.S.C. § 1335(a). Cornell LII. ↩

10. Morgan Stanley Smith Barney LLC v. Carter-McReynolds, No. GLR-24-3042 (D. Md. Aug. 14, 2026) (memorandum opinion) (No. 8:24-cv-03042). ↩ ↩² ↩³

11. Raymond James & Associates, Inc. v. Ellison, No. 6:23-CV-06497 EAW (W.D.N.Y. Aug. 29, 2024) (decision and order, ECF No. 40), at 10–11. GovInfo. ↩ ↩²

12. Raymond James & Associates, Inc. v. Ellison, No. 6:23-CV-06497 EAW (W.D.N.Y. Nov. 24, 2025) (decision and order, ECF No. 52), at 4–11. GovInfo. ↩ ↩²

13. Raymond James & Associates, Inc. v. Medina, No. 5:25-cv-01904 (N.D. Ala. Apr. 28, 2026) (order, ECF No. 49), as described in the docket entry and in the May 13, 2026 memorandum opinion at 2. Justia docket. ↩ ↩²

14. Raymond James & Associates, Inc. v. Medina, No. 5:25-cv-1904-CLS (N.D. Ala. May 13, 2026) (memorandum opinion, ECF No. 55), at 2–3 & n.3 (bond and discharge), 6–9 (answers and cross-claims), 10–15 (default not set aside), 18–19 (default judgment), 19–21 (judgment on the pleadings), 21–22 (fees). GovInfo. ↩ ↩² ↩³

15. Complaint for Interpleader ¶¶ 15–38, 47, Raymond James & Associates, Inc. v. Ellison, No. 6:23-cv-06497 (W.D.N.Y. filed Aug. 28, 2023), ECF No. 1. Allegations only; the court has made no findings on them. ↩

16. Amended Complaint for Interpleader ¶¶ 11–17, 26–27 & n.1, Raymond James & Associates, Inc. v. Medina, No. 5:25-cv-01904 (N.D. Ala. filed Nov. 6, 2025), ECF No. 4. Allegations only. The original complaint (ECF No. 1, filed Nov. 3, 2025) named only the four 2025 beneficiaries. ↩