Payable On Death: 17 Powerful Reasons to Use Them Today

Editor July 31, 2025Last Updated: July 31, 2025

0 438 4 minutes read

By DAYO ADESULU

If you’re looking for a simple, low-cost way to ensure your money goes to the right people after you pass away—Payable On Death (POD) accounts might be exactly what you need. These accounts are widely used in estate planning to bypass the hassle of probate, reduce legal expenses, and provide peace of mind.

In this guide, you’ll discover how POD accounts work, why they matter, and 17 compelling reasons to consider one today.

What is a Payable On Death (POD) Account?

A Payable On Death account is a financial account—like a bank account or certificate of deposit—that automatically transfers to a named beneficiary when the account holder dies. It’s a simple estate planning tool that doesn’t require a will or the probate process.

Brief Legal Background

The concept of POD accounts emerged in the U.S. banking system as a way to simplify asset transfer without court involvement. It’s legally recognized in all 50 states and governed by both state and federal regulations, especially in banking and estate law.

How Payable On Death Accounts Work

When you set up a POD account, you name a beneficiary who will receive the funds upon your death. Until that time, the beneficiary has no access or control over the account.

Setting It Up

To designate a POD:

Visit your bank or financial institution
Fill out a beneficiary form
Provide legal ID and relevant documents

Once it’s set, the account is yours to manage until you pass away.

How It Differs From Joint Accounts

Joint accounts give access to more than one person during life, while a POD account transfers only upon death, ensuring full control stays with you until the end.

Types of Accounts Eligible for POD Designation

Checking and Savings Accounts: The most common types of POD-enabled accounts.
Certificates of Deposit (CDs): Even CDs can be designated as POD with minimal effort.
Investment Accounts: Some brokerage firms offer POD or Transfer On Death (TOD) designations.

Advantages of POD Accounts

Avoids Probate: Assets transfer instantly without the delay and cost of probate.
Low Cost: No legal fees are required to set one up.
Simple Setup: Often just a signature at the bank.
Immediate Access: Beneficiaries can access funds fast, easing financial burdens.
Private: Avoids the public nature of probate records.
Control: You retain full control of the funds until death.
No Need for a Will: PODs operate outside your will.

Disadvantages and Limitations

Irrevocable After Death: Once you’re gone, the money goes directly to the named person.
Potential Disputes: Other heirs may contest the arrangement.
Tax Impact: Funds may still be subject to inheritance taxes.
Not Ideal for Complex Estates: If your estate includes property, trusts may be better.

Payable On Death vs Transfer On Death (TOD)

Feature	POD	TOD
Common for	Bank accounts	Stocks, bonds, and vehicles
Named by	Account owner	Account owner or titleholder
Probate Avoidance	Yes	Yes

Choose POD for cash accounts and TOD for investment assets or titled property.

Who Should Consider a POD Account?

Seniors looking to simplify inheritance
Individuals without dependents
Families managing modest estates
People with minimal legal knowledge

Steps to Set Up a POD Account

Choose a reputable bank or institution
Request POD designation on your chosen account
Name a trusted beneficiary
Provide accurate documentation
Review and update regularly

How POD Accounts Bypass Probate

Probate can take months or even years. With a POD account:

Funds transfer automatically
No court order required
Saves time, money, and stress

Example: Mary set up a POD for her $30,000 savings account. Upon her passing, her son received the funds within two weeks—no legal fees involved.

Common Misconceptions About PODs

They override wills? No. A POD trumps a will only for the specific account it’s attached to.
Tax-free? Not always—inheritance taxes may apply.
Can I name multiple people? Yes, but be clear on how the split should happen.

Updating and Managing Your POD Account

You should update:

After marriage, divorce, or death of a beneficiary
When your estate plan changes
Every 2–3 years as a best practice

If your beneficiary passes before you, the account may go to probate unless you name a backup.

Legal Considerations and Pitfalls

PODs are legal tools, but:

They can conflict with your will or trust
Each state may have different rules
Not ideal for complex family arrangements or large estates

Tax Implications of POD Accounts

Federal Estate Tax: May apply for estates over a certain threshold.
State Inheritance Tax: Depends on where you live.
Reporting: Beneficiaries should report income where required.

Always consult a tax advisor for up-to-date regulations.

Alternatives to POD Accounts

Joint Ownership: Risky due to shared access.
Living Trusts: Best for larger or more complex estates.
Wills: Essential, but slower and public.

Case Studies and Examples

Simple Case: John designated his wife on his POD savings account. Upon death, she accessed the funds in 10 days.

Complex Case: A father named only one of his three children as POD. The others contested in court, causing family strife.

Frequently Asked Questions (FAQs)

Q1. Can I name more than one beneficiary on a POD account?
Yes, most banks allow multiple names. Specify equal or percentage-based distribution.

Q2. What if my beneficiary dies before me?
You must update the POD or risk the account entering probate.

Q3. Do POD accounts go through the court?
No, they transfer directly without legal involvement.

Q4. Can creditors access POD accounts?
Possibly, if the estate has unpaid debts or the beneficiary owes taxes.

Q5. Is a POD account part of my will?
No. It exists independently and overrides the will for that asset.

Q6. Do POD accounts earn interest?
Yes, they function like normal accounts with interest and liquidity.

Payable On Death accounts are one of the easiest and most effective tools in basic estate planning. They allow your loved ones to avoid probate, access funds quickly, and maintain privacy. While they aren’t perfect for everyone, they offer tremendous value for small to medium-sized estates.

Before setting one up, evaluate your beneficiaries, consult a financial advisor, and make sure your estate plan works in harmony with your POD account.