Payable-on-death account: how a POD account skips probate

Marisol's father kept about $38,000 in a credit union savings account for most of her adult life. When he died, she assumed it would be tied up for months while his small estate went through probate. Instead, the teller looked up the account, saw a three-letter note on the file, and asked for a death certificate and her driver's license. The money was in Marisol's account eleven days later.

Those three letters were POD, short for payable on death. A payable-on-death account is a regular bank account with a beneficiary attached. You keep complete control while you're alive, and when you die the bank pays the balance directly to the person you named, without probate. This guide covers how POD accounts work, how to set one up, what they can't do, and the small mistakes that send the money back to court anyway. Bank policies and state laws differ, so use this as a starting point and confirm details with your bank or a local attorney.

What a payable-on-death account is

A payable-on-death account is a checking, savings, money market, or CD account where the owner has filed a form naming one or more beneficiaries. Nothing about the account changes during the owner's lifetime. At death, the named beneficiary can collect the money by showing the bank proof of death and identity.

You may also see these called Totten trusts or informal trust accounts. Cornell's Legal Information Institute describes a Totten trust as a bank account held "in trust for" a beneficiary, which the owner can revoke at any time. In everyday use, POD and Totten trust mean basically the same thing.

The beneficiary has no claim on the money until you die. They can't withdraw it. They don't get statements, and you don't need their signature to spend the money, change the beneficiary, or close the account. Many people never tell their beneficiary at all, though I'd argue that's usually a mistake (more on that below).

Brokerage accounts have a cousin called transfer on death, or TOD. It works the same way for stocks, bonds, and mutual funds. Almost every state has adopted a version of the Uniform TOD Security Registration Act, so most brokerages offer it.

How a POD account avoids probate

A POD account skips probate because the money never becomes part of your probate estate. The bank has a contract with you that says who gets paid when you die, and it honors that contract directly.

That matters more than people expect. Probate can take anywhere from a few months to well over a year, and while it runs, the money in a deceased person's individual accounts is usually frozen. If you've read our guide to closing a bank account after someone dies, you know how stressful that freeze can be when the funeral bill arrives before the court paperwork does.

POD designations also override your will. This is the same rule that applies to life insurance and retirement accounts, which we cover in detail in our post on beneficiary designations. If your will leaves everything to your two children equally but your savings account names only one of them as POD beneficiary, that child gets the savings. The will has no say.

For many families, POD accounts combine with other tools to keep the whole estate out of court. A house can pass through a transfer-on-death deed in states that allow it, retirement accounts go to named beneficiaries, and whatever is left over may be small enough for a small estate affidavit.

How to set up a payable-on-death account

Adding a POD beneficiary is usually free and takes about ten minutes. You don't need a lawyer, and you don't need to open a new account.

1. Call your bank or log in to online banking and ask for a POD or beneficiary designation form. Some banks let you do it entirely online.
2. Write each beneficiary's full legal name. Most banks also ask for a date of birth or Social Security number so they can confirm identity later.
3. Decide how to split the money if you name more than one person. Most banks default to equal shares.
4. Sign and submit the form, then ask for written confirmation.
5. Check your next statement or account details page. The beneficiary's name, or the letters POD, should appear somewhere on the account record.

Do this for every account. People often update their main checking account and forget the CD they opened at a different bank in 2011 to get a better rate. Each account has its own designation, and an account without one goes through your estate.

Check the account title first

POD designations only work on accounts you own alone or with a spouse or partner. If the account is joint with right of survivorship, the surviving owner gets the money first, and the POD beneficiary only collects after both owners die. That's often what couples want, but it's worth knowing which rule applies before you assume your daughter is next in line.

POD vs adding someone to your account as a joint owner

Lots of older adults add a grown child to their checking account so the child can "handle things" later. It's an understandable instinct, and it often causes problems that a POD designation would have avoided.

When you make someone a joint owner, you're giving them ownership today, not just at your death. They can withdraw every dollar tomorrow, legally. If they get sued, go through a divorce, or file for bankruptcy, the account may be exposed. And because the joint owner automatically inherits the full balance, your will's plan for dividing money among several children can quietly fall apart. A son who was added to Mom's account "just for convenience" ends up with all of it, and his siblings get nothing from that account unless he chooses to share.

A POD beneficiary has none of those rights or risks while you're alive. The tradeoff is that a POD beneficiary can't pay your bills if you become sick or incapacitated. For that, the usual tool is a durable financial power of attorney, which lets someone act on your behalf without owning your money. Many people set up both: a power of attorney for while they're alive, and POD for after. The Consumer Financial Protection Bureau has a free series of guides for people managing someone else's money that explains the difference in plain language.

Mistakes that send POD money back to probate

The POD system is simple, which is why its failures are so frustrating. Most of them come from a form that was filled out once and never looked at again.

The most common problem is a beneficiary who died first. If you named only your husband and he died before you, the designation usually lapses and the account falls into your estate. Name a backup, or at least review the account after every death in the family.

An outdated name causes similar trouble. An ex-spouse can still collect POD money years after a divorce, because in many states the automatic revocation rules that cover wills don't reliably reach bank designations. If your life has changed, assume the form hasn't changed with it.

Naming a minor is trickier than it looks. Banks generally won't hand $50,000 to a nine-year-old, so a court may have to appoint a guardian or conservator to receive it, which defeats the purpose. Some banks let you name an adult custodian for a minor under your state's Uniform Transfers to Minors Act. Ask about that option, or consider naming a trust instead.

Uneven accounts can wreck an even plan. Picture a widow with two sons. She names Tom as POD on her checking account and David on her savings, planning to keep the balances roughly equal. Eight years later the savings account has $4,000 in it and the checking account has $61,000 because she moved money around to pay for a new roof. Her will says the boys should share equally, but the will doesn't control either account. If equal shares matter to you, name all your children on every account and let the bank split it.

What a POD account won't protect

A payable-on-death designation avoids probate, but it doesn't make the money untouchable. In many states, if the rest of the estate can't cover the deceased person's debts and final expenses, creditors can come after POD funds. The beneficiary may be asked to give some of it back.

Medicaid can also be a factor. Some states use expanded estate recovery rules that reach assets passing outside probate, including POD accounts, to repay long-term care costs. If Medicaid is paying, or might pay, for nursing home care, it's worth a conversation with an elder law attorney before relying on POD alone.

On taxes, the picture is mostly calm. Inheriting cash from a bank account isn't income for federal tax purposes, so the beneficiary doesn't owe income tax on the balance itself. Interest the account earns after the date of death is taxable to whoever receives it. A handful of states still have inheritance taxes, which can apply to some beneficiaries depending on their relationship to the person who died. A CPA can tell you whether that applies to your situation.

FDIC coverage changes with POD beneficiaries

Adding POD beneficiaries can increase your federal deposit insurance. Under rules the FDIC simplified in April 2024, trust accounts (which include POD accounts) are insured up to $250,000 per owner per beneficiary, for up to five beneficiaries, at each bank. A single owner with five named beneficiaries could have up to $1.25 million insured at one bank. The FDIC's deposit insurance pages have a calculator if you want to check your own accounts.

Telling your beneficiary, and leaving a note

You aren't required to tell anyone they're your POD beneficiary, and some people prefer not to. Still, an unknown POD account is easy to lose. If no one knows the account exists, it can sit untouched until the bank eventually reports it to the state as unclaimed property, and your beneficiary has to find it through a state database years later, if they ever do.

At the very least, make a list of every account, the bank, and who you named on each. Keep it with your will or in your letter of instruction. A simple line like "Credit union savings, POD to Marisol" saves your family hours of phone calls.

Marisol's father had actually done one more thing. Tucked into the folder with his credit union statements was a half-page note, written in pencil, saying he'd been putting $50 a month into that account since she was born, that he'd meant it for her wedding, and that she should spend it on whatever made her happy instead. She read it standing in the credit union lobby. She told me later that the money mattered less than knowing he'd been thinking about her every month for 41 years.

If you're setting up POD designations this week, it might be worth writing a note like that too. When I Die Files gives you one place to list your accounts and beneficiaries, and to leave the letter that explains the why behind them, so your family finds both together.