A payable on death account is a regular bank account with a beneficiary designation attached: while you’re alive, nothing changes about how you use it, and when you die, the balance passes directly to the person you named without going through probate. Banks and credit unions offer the designation at no cost on checking accounts, savings accounts, money market accounts, and certificates of deposit. One form does the job.
How the Designation Works
A POD designation sits dormant until you die. Your beneficiary has no legal claim to the money in the meantime, no access to the account, and no ability to make withdrawals. You keep full control. You can spend every dollar, close the account, or swap in a different beneficiary whenever you want, and revoking the designation takes nothing more than updated paperwork at the bank.
On a joint account with right of survivorship, the POD transfer only kicks in after the last surviving owner dies. Until then, the surviving owner has complete authority over the funds, including the power to change the beneficiary or drop the POD designation entirely.
Setting One Up
Ask your bank or credit union for a Beneficiary Designation Form, sometimes labeled a POD Addendum. It usually isn’t part of standard account-opening paperwork, so you have to request it. The form asks for each beneficiary’s full legal name and typically their date of birth or Social Security number, which the bank uses to verify identity at payout.
You can name more than one beneficiary, and the funds are generally split equally unless you specify different percentages. Naming a contingent beneficiary is worth the extra line of ink. If your primary beneficiary dies before you do and no contingent is listed, the funds fall back into your probate estate, which defeats the point of setting up the designation in the first place.
Naming a Minor
Banks generally will not release POD funds directly to someone under 18. If you name a minor child as your beneficiary, the money can get stuck until a court appoints a guardian or conservator to manage it. That process takes time and costs money. A cleaner approach is to name an adult as custodian for the child under the Uniform Transfers to Minors Act, which nearly every state has adopted. On the beneficiary form, you would write something like “Jane Doe, as custodian for Sam Doe under the Uniform Transfers to Minors Act.” The custodian manages the money until the child reaches the age specified by state law, usually 18 or 21.
Naming a Charity
Most banks allow a nonprofit organization as a POD beneficiary. Provide the charity’s legal name and tax identification number on the beneficiary form. When the account transfers at death, the estate can claim a charitable estate tax deduction for the amount that goes to the qualified organization.
FDIC Coverage on POD Accounts
Adding POD beneficiaries can meaningfully increase the federal deposit insurance on your account. The FDIC insures POD accounts at $250,000 per owner, per beneficiary, up to a cap of $1,250,000 per owner when five or more beneficiaries are named.1FDIC. Trust Accounts So a single owner who names three beneficiaries gets $750,000 in coverage at that bank instead of the standard $250,000.
- 1 beneficiary: $250,000 coverage
- 2 beneficiaries: $500,000 coverage
- 3 beneficiaries: $750,000 coverage
- 4 beneficiaries: $1,000,000 coverage
- 5 or more beneficiaries: $1,250,000 coverage
One caution: the FDIC combines all of an owner’s trust-type deposits at the same bank, including formal trusts, informal trusts, and POD accounts, when calculating the limit. Multiple accounts at the same institution don’t multiply the ceiling.2FDIC. Your Insured Deposits
Why the POD Form Beats Your Will
A POD designation is a contract with the bank, and it operates independently of your will. If your will leaves a bank account to one person but the POD form at the bank names someone else, the POD beneficiary wins. The bank follows its own contract, not the probate court’s instructions. This is the most common source of unintended results with POD accounts: people update their will and forget to update the beneficiary form at the bank, and the money goes to the wrong person.
The same principle applies to revocable living trusts. A POD designation overrides the trust’s terms unless the trust itself is named as the beneficiary. If your estate plan runs through a revocable trust, either retitle the account into the trust or name the trust as the POD beneficiary so the two instruments work together.
Divorce is another moment to pull the form back out. Roughly half the states automatically revoke an ex-spouse as a beneficiary when a divorce is finalized. In the rest, the ex-spouse stays on the account unless you file new paperwork. Updating the designation directly, regardless of where you live, is the safer move.
Incapacity matters too. An agent under a power of attorney generally cannot change your POD beneficiary unless the POA document specifically grants that authority. Without explicit language, any attempt to change the designation could be challenged as a breach of fiduciary duty. If this matters to you, address it in the POA itself.
What Creditors and Medicaid Can Still Reach
A POD designation skips probate, but it doesn’t automatically put the money beyond creditors. Many states allow creditors to pursue nonprobate assets when the probate estate lacks enough to cover the deceased’s debts. Under those statutes, a POD beneficiary can be held liable up to the value of what they received.
Medicaid estate recovery is the one to watch. Federal law gives every state the option to define “estate” broadly enough to include nonprobate transfers such as POD accounts when recovering the cost of long-term care.3Office of the Law Revision Counsel. 42 USC 1396p – Liens, Adjustments and Recoveries, and Transfers of Assets A number of states have exercised that option. If the deceased received Medicaid-funded nursing home care, the state Medicaid agency may file a claim against POD funds after death. Families often assume the designation puts money out of reach; it doesn’t always.
Taxes on Money You Inherit This Way
Money received through a POD designation is not taxable income to the beneficiary. The IRS treats it like any other inheritance, and the transfer itself is tax-free at the federal level.4Internal Revenue Service. Publication 559 – Survivors, Executors, and Administrators The full value is still counted in the deceased owner’s gross estate for federal estate tax purposes, but for 2026 the federal estate tax exemption is $15,000,000, so estate tax only applies above that threshold.5Internal Revenue Service. What’s New – Estate and Gift Tax
Interest earned by the account after the owner’s date of death is taxable income to whoever receives it. The inherited principal is tax-free; post-death earnings are not.4Internal Revenue Service. Publication 559 – Survivors, Executors, and Administrators Five states (Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania) also impose a state-level inheritance tax that may apply to POD funds depending on the beneficiary’s relationship to the deceased.
Claiming the Funds
After the account owner dies, the beneficiary brings two things to the bank: a certified copy of the death certificate and a government-issued photo ID. Most banks also have their own claim form or affidavit. Once identity matches the designation on file, the bank typically opens a new account in the beneficiary’s name or cuts a cashier’s check. The turnaround is usually a matter of days.
Certified death certificates run $5 to $34 depending on the state, and you’ll likely need several copies if you’re also handling insurance policies, retirement accounts, or real estate. Order extras upfront rather than making repeated trips to the vital records office.
POD Accounts vs. TOD Accounts
The two terms are easy to confuse. A payable on death designation applies to deposit accounts at banks and credit unions: checking, savings, money market, and CDs. A transfer on death (TOD) designation does the same job for investment accounts, including brokerage accounts, individual stocks, bonds, and mutual funds. Both skip probate, both are revocable, and both give the beneficiary no rights until the owner dies. Claiming a TOD investment account usually involves more paperwork and a longer processing timeline than walking into a bank with a death certificate.