Bank accounts can pass directly to a named person without going through probate if you set them up the right way before you die
Probate is the court process that settles your estate after death. It takes months or years, costs money in legal and court fees, and makes your financial details public. You can avoid it for bank accounts by naming a beneficiary or co-owner now, while you're alive. The account then transfers automatically to that person when you die—no court involvement, no delay, no probate fees on that money.
The three main methods are payable-on-death (POD) accounts, transfer-on-death (TOD) registrations, and joint accounts with survivorship rights. Each works differently, has different tax and control implications, and is available in different states. Choosing the wrong one can create problems for the person you meant to help, or leave money stuck in probate anyway.
Key Takeaways
- A payable-on-death account lets you name a beneficiary who receives the money automatically after you die, with no probate court involvement.
- Joint accounts with survivorship rights pass to the surviving owner immediately, but that person can access and spend the money while you're still alive.
- Transfer-on-death registrations work like POD accounts but are available only in some states and only for certain account types.
- If you die without naming a beneficiary or co-owner, the account goes through probate and is distributed according to your state's intestacy laws, which may not match your wishes.
- Naming a minor as a POD beneficiary requires you to also name a custodian, or the money will be held in probate until they turn 18 or 21.
Payable-on-Death (POD) accounts: the simplest route
A POD account is a regular checking or savings account with a named beneficiary attached. You keep full control and access while alive. When you die, the bank transfers the balance directly to the person you named—no probate, no court order needed. The beneficiary simply shows the bank a death certificate and proof of identity.
To set one up, contact your bank and ask to add a POD beneficiary to an existing account, or open a new account with POD language. You'll provide the beneficiary's full name, date of birth, and Social Security number. The bank will give you a form to sign. There is no cost. The beneficiary has no rights to the money while you're alive—they can't access it, and you can change or remove them at any time without their knowledge or permission.
POD accounts are available at most banks and credit unions nationwide. Some states call them "Totten trusts" (New York) or use slightly different language, but the function is the same. Check with your specific bank if you're unsure whether they offer it.
Joint accounts with survivorship rights: immediate access, immediate risk
A joint account with survivorship rights (also called "joint tenancy with rights of survivorship" or JTWROS) names another person as a co-owner. When you die, the surviving co-owner automatically owns the full balance. Like a POD account, it avoids probate. Unlike a POD account, the co-owner can access and withdraw money while you're alive.
This is useful if you need someone to help manage your finances or pay bills on your behalf. It is dangerous if you want to protect the money from that person's creditors, divorce, or spending habits. Once they're a joint owner, they legally own half the account (or their share), and their creditors can go after it. If they get divorced, their ex-spouse may have a claim. If they file for bankruptcy, the account may be seized.
Joint accounts also create tax complications. If the co-owner contributed nothing to the account, the IRS may treat large deposits as gifts, which can trigger gift tax reporting (though not necessarily a tax bill). When you die, the surviving co-owner receives a "stepped-up basis" on their half of the account, meaning they owe no income tax on gains that happened while you were alive—but only on their half.
To set up a joint account, tell your bank you want to add a co-owner with survivorship rights. Provide their name, date of birth, and Social Security number. Both of you will need to sign. Some banks require both owners to be present in person.
Transfer-on-Death (TOD) registrations: for brokerage and investment accounts
TOD registrations are similar to POD accounts but apply to stocks, bonds, mutual funds, and brokerage accounts rather than bank deposits. You name a beneficiary, and when you die, the securities transfer directly to them without probate. You keep full control while alive and can change the beneficiary anytime.
TOD is available in most states, but not all, and not all brokerages offer it. Check with your investment firm—Fidelity, Vanguard, Charles Schwab, and most major brokers do. Some states limit TOD to certain types of securities or require specific language on the account registration. A few states do not recognize TOD at all, in which case those accounts will go through probate.
The main advantage over a will or trust is speed and cost. The disadvantage is that TOD beneficiaries receive no "stepped-up basis" on appreciated securities—they inherit them at the price you paid, not the price at death. This can create a large tax bill if the securities have gained significantly. A revocable living trust avoids this problem but requires more setup and ongoing maintenance.
What happens if you name no one: probate by default
If you die without a POD beneficiary, joint owner, or will, your bank account goes through probate. The court appoints an executor (or a public administrator if no one steps forward) to settle your estate. The executor must locate all your assets, notify creditors and heirs, pay taxes and debts, and distribute what's left according to your state's intestacy laws.
Intestacy laws vary by state but generally prioritize spouse, then children, then parents, then siblings. If you have no relatives the state can find, the money goes to the state. The process takes six months to two years depending on the state and the complexity of your estate. Court and legal fees typically run from a few hundred to several thousand dollars, depending on the account size and state.
Even a small account can be expensive to probate. A $5,000 savings account in some states can cost $500 to $1,000 in probate fees alone. POD and joint accounts avoid this entirely.
Naming a minor as beneficiary: the custodian requirement
If you name a child or grandchild as a POD beneficiary, the bank will not release the money to them directly when you die. Instead, the money will be held in probate or by the bank until they reach the age of majority (18 in most states, 21 in some). To avoid this delay, name a custodian at the same time you name the minor beneficiary.
A custodian is an adult who manages the money on the child's behalf until they come of age. You can name the same person as both custodian and beneficiary (for example, a parent), or name different people. The custodian has a legal duty to spend the money only for the child's benefit—education, medical care, living expenses—and must account for it when the child turns 18 or 21.
Some banks use the Uniform Transfers to Minors Act (UTMA) or Uniform Gifts to Minors Act (UGMA) language for this. Ask your bank what language they use and whether you can name a custodian on the POD form itself, or whether you need a separate document.
Comparing the three methods
| Method | Account Type | Beneficiary Access While You're Alive | Probate Avoided | Cost to Set Up |
|---|---|---|---|---|
| POD Account | Bank deposits (checking, savings) | No | Yes | None |
| Joint Account | Bank deposits (checking, savings) | Yes | Yes | None |
| TOD Registration | Stocks, bonds, mutual funds, brokerage accounts | No | Yes | None |
Changing or removing a beneficiary after you set it up
You can change a POD or TOD beneficiary anytime while you're alive, with no notice to the current beneficiary. Contact your bank or broker, fill out a new beneficiary form, and sign it. The old beneficiary has no legal claim to the money—the account goes to whoever is named at the time of your death.
Removing a joint owner is more complicated. You cannot unilaterally remove them from the account. You must close the account and open a new one in your name alone, or ask the joint owner to sign a form removing themselves. If they refuse, you may need a lawyer to remove them, which can be expensive and time-consuming.
This is another reason joint accounts carry risk: once someone is a co-owner, they have legal rights to the account, and you cannot simply erase them.
Frequently Asked Questions
Can I name multiple beneficiaries on a POD account?
Yes. You can name two or more people, and you can specify how the money is divided (for example, 50% to one person, 50% to another, or equal shares). If you don't specify, most banks divide it equally. If one beneficiary dies before you, their share usually goes to the surviving beneficiaries unless you named an alternate.
Does a POD account affect my taxes or Social Security?
A POD account is yours while you're alive, so it counts toward your income, assets, and means-tested benefits like Medicaid or SSI. After you die, the beneficiary receives the money tax-free (it's not income to them), but if the account earned interest, that interest is taxable income to your estate in the year you die. Your executor reports it on your final tax return.
What if I name my bank or a charity as POD beneficiary?
You can name any person or organization. If you name a charity, the money goes to them tax-free, and your estate may claim a charitable deduction. If you name the bank itself, the money typically goes to the bank's general account, which is unusual and not recommended—talk to a lawyer if you're considering this.
Can creditors go after a POD account after I die?
Yes, but only if your estate has no other assets to pay debts. The beneficiary receives the POD money free and clear, but if you owe taxes, medical bills, or other debts, creditors can pursue your other assets first. Once those are exhausted, they may be able to reach the POD account. This is rare and depends on state law.
Is a POD account the same as a living trust?
No. A POD account is simpler and costs nothing to set up, but it only covers that one account. A living trust can hold multiple accounts, real estate, and other assets, and it gives you more control over how money is used after you die (for example, you can require the beneficiary to use it only for education). A trust is more expensive to set up and requires you to transfer assets into it, but it's more flexible for complex situations.