Free Guide to Understanding Payable on Death Accounts

What Is a Payable on Death Account?

A Payable on Death (POD) account is a bank or financial institution account that transfers money directly to a person you name after you pass away. This type of account lets you keep full control and access to your money while you're alive. When you die, the money in the account goes straight to the person or people you've named as beneficiaries, without going through the legal process called probate.

POD accounts are also called "transfer on death" accounts or "in trust for" accounts, depending on your bank or credit union. The basic idea is the same across all these names: you own and control the money during your lifetime, and it passes to your chosen beneficiary automatically when you die.

The account works differently from a regular savings or checking account because it has a named beneficiary attached to it from the start. You fill out a form when you open the account (or add the designation to an existing account) that tells the bank who should receive the money when you pass away. This beneficiary designation is separate from your will. Even if your will says something different, the POD designation takes priority.

One important feature of POD accounts is that your beneficiary has no rights to the money while you're living. You can spend all the money, close the account, or change who the beneficiary is whenever you want. Your beneficiary only receives the funds after you die and the bank is notified of your death.

Practical takeaway: A POD account is a straightforward way to pass money to someone after you die without requiring them to go through probate court. You keep complete control during your lifetime, and the transfer happens automatically when the bank learns of your death.

How POD Accounts Differ From Other Account Types

Understanding how POD accounts work compared to other ways of holding money or leaving it behind helps you figure out if this option fits your situation. A regular savings account or checking account has no beneficiary designation. When you die, the money in that account becomes part of your estate and goes through probate, which means a court process determines who gets it based on your will or state law if you don't have a will.

A joint account is different from a POD account in important ways. With a joint account, the other person on the account can withdraw money and spend it while you're both alive. They also have full ownership rights. When you die, the money in a joint account usually passes to the surviving joint owner automatically, without probate. However, you're giving that person access to your money right now, not just after you die. Many people don't want to give someone that kind of access during their lifetime.

A trust is another way to pass money to people after you die. Trusts are more complicated and often cost money to set up with a lawyer. With a trust, you transfer ownership of your money to the trust, and a trustee manages it according to instructions you write down. Trusts can provide more control over how money is used after you die and can offer privacy since trusts don't go through public probate court. Trusts also work for multiple types of assets like real estate, investments, and personal property—not just bank accounts.

POD accounts are simpler and cheaper than trusts. You don't need a lawyer to set one up, and there are no ongoing costs. Banks and credit unions offer POD designations for free or as a standard feature. Unlike joint accounts, a POD account keeps your money under your sole control while you're alive. Your beneficiary can't touch the funds until after you die.

Some people use a combination of these tools. For example, you might have a POD account for money you want to pass to one person, a joint account with your spouse for everyday expenses, and a trust for other assets like your house or investment accounts.

Practical takeaway: POD accounts offer a middle ground—easier and cheaper than trusts, but keeping your money more private and under your control compared to joint accounts. The right choice depends on how much money you have, what you own, and who you want to receive different assets.

How to Open or Add a POD Designation to Your Account

Most banks and credit unions can set up a POD account or add a POD designation to an account you already have. The process is straightforward and doesn't require paperwork beyond what the bank provides. Here's what typically happens:

First, contact your bank or credit union and ask to open a POD savings or checking account, or ask to add a beneficiary designation to an existing account. Many banks let you do this in person at a branch, over the phone, online, or through a mobile app. Ask the staff or customer service representative which methods your bank offers.

When you start the process, you'll need to provide the name of the person or people you want to be your beneficiary. If you're naming more than one person, you'll also specify how the money should split between them—for example, 50% to each person, or different percentages. You'll need the beneficiary's full name and Social Security number so the bank can identify them correctly.

The bank will give you a form to complete. This form asks for your information, your beneficiary's information, and how you want the money divided if you've named multiple beneficiaries. You'll sign the form, and the bank will keep it on file. There's no charge for this service at most banks and credit unions.

After you set up the POD designation, keep a record of which account has it and who you named as beneficiary. It's a good idea to keep this information in a safe place where someone you trust can find it if needed, such as with your important documents or in a safe deposit box. You might also want to tell your beneficiary that you've named them, especially so they know what to do when you pass away and where to find the account.

You can change your beneficiary anytime while you're alive. Just contact your bank and ask to update the POD designation. You'll fill out a new form. The bank will keep the most recent form you signed, and that's who the money will go to when you die.

Practical takeaway: Opening a POD account or adding a POD designation to your existing account takes just a few minutes and is free. You only need the beneficiary's name and Social Security number, and you can change your choice whenever you want.

Tax Implications and How POD Accounts Affect Your Estate

One of the reasons people choose POD accounts is that money passing through a POD designation generally doesn't face probate court delays or probate fees. However, there are some tax and estate planning details you should understand.

For income tax purposes, money in a POD account that you've earned interest on will have taxes owed on that interest. If you've received $10 in interest in a calendar year, for example, your bank will send you and the IRS a form showing that interest, and you'll owe income tax on it like you would with any other savings account. The POD designation doesn't change how income tax works while you're alive.

After you die, the money in the POD account becomes part of your estate for federal estate tax purposes. If your total estate is worth more than the federal estate tax threshold (which is $13.61 million for deaths in 2024, but this number changes yearly), your estate may owe federal estate tax. Most people's estates are worth less than this amount, so they won't face federal estate tax. Some states also have estate taxes or inheritance taxes with lower thresholds, so it's worth knowing whether your state taxes estates.

The money your beneficiary receives from a POD account is generally not subject to income tax. They won't owe federal income tax on the money itself, only on any interest that accumulates in the account after you die and before they receive it—and typically that interest amount is small since the transfer usually happens quickly.

POD accounts do count toward your estate for Medicaid planning purposes if you're receiving Medicaid benefits for long-term care. If Medicaid has paid for your nursing home or in-home care, Medicaid may seek payment from your estate after you die, which could include money in POD accounts. This is an important consideration if Medicaid is paying for your care.

Unlike money left through your will, money in a POD account doesn't go through probate. This means your estate doesn't pay probate court fees on that money, and the transfer to your beneficiary happens faster—usually within days or weeks rather than months. This is one of the main advantages of using POD accounts