Payable On Death (POD)

Payable on Death (POD)

A payable-on-death (POD) account is a bank account or similar deposit on which the account holder names one or more beneficiaries to receive the funds automatically when the account holder dies. Also called a Totten trust, a POD bypasses probate and generally overrides provisions in a will for that specific account.

How a POD account works

• The account holder designates beneficiary(ies) by completing a beneficiary form at the bank or financial institution. This is revocable — the owner can spend the funds, change the beneficiary, or close the account while alive.
• When the account holder dies, the named beneficiary (or beneficiaries) becomes the owner of the account without probate.
• To claim the funds, the beneficiary must present a government-issued ID and a certified copy of the death certificate.
• POD designations do not shelter assets from creditors or tax authorities; claims for unpaid debts or taxes can still be made against the assets.

What assets can be POD

Common POD-eligible assets include:
* Checking and savings accounts
* Certificates of deposit (CDs)
* Savings bonds and certain deposit-type accounts
Availability depends on the financial institution and account type.

FDIC insurance implications

A POD account is treated differently for deposit insurance purposes than a single-owner account. Under FDIC rules, revocable trust/POD accounts may receive insurance coverage of up to $250,000 per unique beneficiary (subject to the FDIC’s specific requirements). This can increase total coverage when multiple qualifying beneficiaries are named.

Beneficiaries: rules and limitations

• A beneficiary has no access to funds while the account holder is alive.
• If the named beneficiary dies before the account holder, the account typically reverts to the owner’s estate (or follows the will).
• Multiple beneficiaries are allowed, but state law or the bank’s procedures may require equal shares and can make dividing complex instruments (like certain bonds) difficult.
• For jointly owned accounts, a POD beneficiary normally cannot claim funds until the last surviving owner dies.
• In community property states, a surviving spouse may have a claim to a portion of the account, depending on when and how assets were acquired.

Common questions

Q: What is the main benefit of a POD account?
A: It allows funds to transfer to the named beneficiary quickly and without probate costs or delay.

Q: Is there a minimum balance required for a POD?
A: No. There’s no minimum or special funding requirement; the owner can change or spend the funds at any time.

Q: How does POD differ from TOD?
A: POD applies to bank deposit accounts; transfer-on-death (TOD) typically applies to securities such as stocks, bonds, and mutual funds.

Key takeaways

• POD is a simple, revocable estate-planning tool to transfer bank assets outside of probate.
• Beneficiaries receive funds promptly after death but must prove the death and their identity.
• POD does not protect assets from creditors or eliminate potential estate-tax issues.
• Review POD designations periodically and when life circumstances change (marriage, divorce, births, deaths).

Bottom line: Adding a POD designation to eligible accounts is an easy way to streamline distributions to heirs, but it should be used thoughtfully as part of broader estate planning.