A payment on death account transfers money directly to someone you name, without going through probate
A payment on death (POD) account is a bank or credit union account that automatically passes to a person you designate when you die. The money in the account bypasses your will and probate court entirely. You keep full control of the account while you are alive—you can spend the money, close the account, or change who receives it at any time. When you die, the bank verifies your death and releases the balance to the person named on the POD form, usually within days or weeks.
The key difference from a regular account is the beneficiary designation. When you open a POD account or add a POD feature to an existing account, you complete a form naming one or more people to receive the money. This designation overrides your will. If your will says your sister gets the account but your POD form names your spouse, your spouse gets the money.
Key Takeaways
- A POD account passes money directly to the person you name, skipping probate court and your will entirely.
- You control the account completely while alive and can spend, close, or change the beneficiary at any time.
- The bank needs a death certificate to release the money, which usually takes one to four weeks after you die.
- Most banks and credit unions offer POD accounts on savings and checking accounts at no extra cost.
- If you name multiple beneficiaries, they typically split the balance equally unless you specify otherwise on the form.
How a POD account works when you die
When you pass away, the person you named as beneficiary contacts the bank with a death certificate. The bank verifies the certificate and your account ownership, then releases the full balance to the beneficiary. No court order is needed. The process usually takes one to four weeks, depending on how quickly the beneficiary provides the death certificate and how busy the bank is.
The beneficiary does not need to be a family member. You can name a friend, a charity, or anyone else. If you name multiple beneficiaries, they typically receive equal shares unless you wrote different percentages on the POD form when you opened the account. Some banks allow you to name a primary beneficiary and a contingent beneficiary—if the primary beneficiary dies before you, the money goes to the contingent instead.
POD accounts versus joint accounts and trusts
A POD account is simpler than a trust but works differently from a joint account. With a joint account, the other owner has access to the money while you are alive and can withdraw it without your permission. With a POD account, only you can access the money during your lifetime. The beneficiary has no rights to the account until you die.
A revocable living trust is more complex but gives you more control over how money is distributed. With a trust, you can leave different amounts to different people, set conditions (such as "release money when my child turns 25"), and name a trustee to manage the money. A POD account is all-or-nothing: the beneficiary gets the full balance or nothing. If you want to split money among multiple people in different amounts, a trust or a will is more flexible than a POD account.
POD accounts are also faster and cheaper than probate. Probate can take months or years and cost hundreds or thousands in court fees and attorney fees. A POD account costs nothing and transfers in weeks.
Which banks and accounts offer POD designations
Most banks and credit unions allow you to add a POD designation to savings accounts and money market accounts. Some allow it on checking accounts; others do not. Call your bank or credit union to ask whether POD is available on the account type you want. There is no extra fee to add a POD designation.
POD designations are not available on investment accounts such as brokerage accounts or retirement accounts (401(k)s, IRAs). Retirement accounts have their own beneficiary designation process, which works similarly to POD but is governed by different rules. Brokerage accounts use transfer on death (TOD) designations, which work the same way as POD but are called by a different name.
How to set up a POD account or add POD to an existing account
If you are opening a new account, ask the bank whether you can add a POD designation at the time you open it. Most banks include a beneficiary designation form with the account paperwork. Fill in the name, address, and Social Security number or tax ID of the person you want to receive the money.
If you already have an account and want to add a POD designation, contact your bank and ask for a beneficiary designation form or a POD amendment form. You will need to provide the beneficiary's full name and contact information. Sign the form in front of a bank employee or notary, depending on the bank's requirements. The bank will file the form and confirm the designation in writing.
You can change or remove a POD designation at any time while you are alive. Contact the bank, complete a new form, and the new designation replaces the old one. Keep a copy of the signed form for your records.
What happens if the beneficiary dies before you
If your named beneficiary dies before you do, the money does not automatically go to their heirs. Instead, the account becomes part of your estate and goes through probate, unless you named a contingent beneficiary. A contingent beneficiary is a second person you name on the POD form to receive the money if the primary beneficiary dies first.
You can name a contingent beneficiary when you open the account or add one later by updating your POD form. If you do not name a contingent beneficiary and your primary beneficiary dies before you, you should update the form to name someone else. If you do not update it and you die while the primary beneficiary is already dead, the bank will hold the money and require a court order to release it to your heirs.
Taxes and POD accounts
The money in a POD account is part of your taxable estate when you die. If your total estate is large enough to owe federal estate tax, the POD account balance counts toward that tax. However, most estates do not owe federal estate tax because the threshold is high (it varies by year and is set by federal law). Your state may have a lower threshold for state estate tax.
The beneficiary does not owe income tax on the money they receive from a POD account. The account itself does not generate income tax liability for them. If the account earned interest before you died, that interest is part of your final income tax return, not the beneficiary's.
Frequently Asked Questions
Can I name more than one beneficiary on a POD account?
Yes. Most banks allow you to name multiple beneficiaries. They typically split the balance equally unless you specify different percentages on the form. Ask your bank whether you can assign different amounts to different people or whether they require equal splits.
What if I change my mind about who gets the money?
You can change the beneficiary at any time while you are alive. Contact your bank, fill out a new POD form, and sign it. The new designation replaces the old one. The previous beneficiary has no claim to the money once you change the form.
Does a POD account avoid probate completely?
Yes, a POD account passes directly to the beneficiary without probate. However, if you do not name a beneficiary or the beneficiary dies before you and you did not name a contingent, the account becomes part of your estate and goes through probate.
Can creditors take money from a POD account after I die?
This varies by state. Some states protect POD accounts from creditors after death; others allow creditors to pursue the account if your estate does not have enough other assets to pay debts. Ask your bank or an attorney about your state's rules.
Is a POD account the same as a trust?
No. A POD account is simpler and faster but less flexible. It passes all the money to one or more people with no conditions. A trust lets you set conditions, split money in unequal amounts, and name someone to manage the money. A trust costs more to set up but gives you more control.