What Is a Payable-on-Death (POD) Account?
– A payable-on-death (POD) account (also called a Totten trust) is a bank account in which the account owner names one or more beneficiaries to receive the account balance automatically when the owner dies. The beneficiary designation bypasses probate: the named beneficiary becomes the owner of the money upon the account holder’s death (unless the beneficiary predeceases the owner) (Investopedia).
– PODs apply to checking, savings, CDs, some savings bonds and safe-deposit box contents in many institutions.
Key takeaways
– POD designations let funds pass outside of probate and go directly to the named beneficiary (Investopedia).
– A POD designation generally overrides a will for that specific account (Investopedia; Atlasas Law Firm).
– The named beneficiary has no legal right to the funds while the owner is alive (Investopedia).
– PODs can increase FDIC coverage if properly structured (FDIC).
– POD funds may still be subject to creditor claims and taxes after death (Investopedia; Morton Law Firm).
How a POD account works (brief)
– The account owner completes a beneficiary-designation form with the financial institution, naming the person(s) or entity to receive the account on death.
– The designation is revocable and the account owner can change it, withdraw funds, or close the account at any time.
– On death, the beneficiary must provide identification and a certified copy of the death certificate to claim funds; the account typically transfers outside the probate process (Investopedia).
Designating a POD account — practical steps
1. Inventory accounts and goals
– List all deposit accounts you own (checking, savings, CDs), and decide which should pass via POD vs. via will or trust.
2. Decide beneficiaries and primary vs. contingent
– Name full legal names and provide Social Security numbers, birthdates, and contact info if the bank asks. Note: some banks and some state laws may not permit formal contingent beneficiaries on PODs—check the institution’s form and state law (Investopedia).
3. Visit your bank or use the bank’s beneficiary form
– Complete the institution’s POD (or TOD for investment accounts) beneficiary-designation form and keep a copy. Confirm the bank has recorded the designation.
4. Confirm distribution rules and state limitations
– Some states require equal shares if multiple beneficiaries are named; complex instruments (e.g., certain bonds) can complicate splitting proceeds (Investopedia).
5. Coordinate with overall estate plan
– Make sure POD designations fit with your will, trust, powers of attorney, and your estate-tax strategy. If you want assets governed by a trust, fund the trust on your accounts rather than using POD alone.
6. Update after major life events
– After marriage, divorce, birth, death, or moves between states—review and update beneficiary designations.
7. Document and inform
– Tell named beneficiaries where to find account information and where you keep copies of beneficiary forms.
Can a beneficiary access bank account funds while the account holder is alive?
– No. A POD beneficiary has no rights to the account while the owner is alive (Investopedia).
– Exception: If the account is a joint account with right of survivorship, the joint owner has access while living. If the account has multiple owners, the POD designation generally becomes effective only after the last surviving owner dies (Investopedia).
Benefits of a POD account
– Avoids probate delays and costs: POD funds generally transfer to beneficiaries without probate (Investopedia).
– Simplicity and low cost: Most banks provide beneficiary-designation forms free of charge.
– FDIC insurance planning: POD accounts can increase deposit insurance coverage. Under FDIC rules, each unique beneficiary designation can create a separate coverage category; in practice, having up to five POD accounts with different beneficiaries can raise insured coverage up to $1,250,000 at a single bank (i.e., $250,000 per beneficiary) if structured properly (FDIC).
– Keeps small transfers out of court and speeds access for beneficiaries.
Important limits, risks, and pitfalls
– Creditor and tax claims: POD funds bypass probate but may still be reachable by creditors of the decedent or included in the decedent’s taxable estate. The estate’s executor may still need access to funds to pay legitimate claims; POD assets may not be available for estate settlement (Investopedia; Morton Law Firm).
– Conflicts with wills: A POD designation generally controls distribution of that account regardless of what a will says (Investopedia; Atlasas Law Firm).
– Joint ownership and community property: If the account is jointly owned, the surviving joint owner typically keeps the account, and a POD name may only apply after the last owner dies. In community property states, a spouse may have a claim to part of the account (Investopedia; Morton Law Firm).
– Multiple beneficiaries: State law can limit how funds are split; some banks disallow contingent beneficiaries and some instruments (like certain bonds) can complicate splitting proceeds (Investopedia).
– No probate protection if beneficiary predeceases owner: If the named beneficiary dies before the account owner and no alternate is named or allowed, the account may pass to the estate and enter probate (Investopedia).
Practical steps for account owners (checklist)
– Confirm which accounts you want to cover with POD designations.
– Get beneficiary-designation forms from each financial institution and fill them out completely (full legal names, SSNs, addresses).
– Ask the bank whether they accept contingent beneficiaries and how they split funds when multiple beneficiaries are named.
– Consider whether a trust would better serve your goals if you need more control over timing, conditions, or creditor protection.
– Maintain records: keep copies of completed forms and note where originals are stored.
– Review POD designations yearly and after major life events.
– Consult an estate attorney or tax advisor if you have a large estate, potential creditor issues, or estate tax concerns.
Practical steps for a beneficiary to make a claim
1. Locate the account information and the financial institution holding the account.
2. Obtain multiple certified copies of the decedent’s death certificate (banks often require one or more).
3. Contact the bank’s probate or fiduciary department and ask what forms/documents they require (typically: beneficiary claim form, government-issued photo ID, certified death certificate).
4. Complete the bank’s claim process. Banks may place a temporary hold to verify the claim and check for liens or creditor claims.
5. If disputes arise (other claimants, estate creditor claims, questions about designation validity), consult an attorney.
POD vs. TOD vs. trust vs. will — quick comparisons
– POD (bank deposits) and TOD (transfer-on-death for brokerage accounts) both transfer asset ownership on death without probate (Investopedia; SEC).
– Trusts can provide greater control (timing, conditions, creditor protection) than POD/TOD but require funding the trust and potentially more setup.
– A will governs assets that pass through probate; beneficiary designations on POD/TOD accounts generally override instructions in a will for those accounts.
Fast fact
– FDIC-insured deposit accounts labeled POD can increase insured coverage. Instead of one $250,000 limit for a single account owner, having POD accounts with different named beneficiaries can, in certain cases, increase total FDIC protection (FDIC).
The bottom line
Payable-on-death accounts are a simple, low-cost way to pass bank deposits quickly to named beneficiaries and avoid probate delays. They are revocable and straightforward to set up, but they do not eliminate creditor claims, may complicate estate administration in some situations, and offer less flexibility than a trust. Always coordinate POD designations with your broader estate plan and consult an attorney or tax advisor for complex estates or when creditor, community-property, or estate-tax issues may apply.
Sources and further reading
– Investopedia. “Payable on Death (POD).”
– Federal Deposit Insurance Corporation (FDIC). “Your Insured Deposits.”
– U.S. Securities and Exchange Commission (SEC). “Transfer on Death (TOD) Registration.” (archived)
– Atlasas Law Firm. “Do the Beneficiaries on a Bank Account Supersede a Will?”
– Morton Law Firm. “Do Spouses and Creditors Have Rights to a POD Bank Account?”
Editor’s note: The following topics are reserved for upcoming updates and will be expanded with detailed examples and datasets.