Payable on Death Accounts
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Payable-on-Death (POD) Accounts

Use a POD financial institution account for avoiding probate.

Payable on death financial institution accounts provides an easy way to keep capital—even larger sums of it—out of probate. All you are required to do is properly give notice to your financial institution of the person you want to inherit the capital in the account and/or CDs. The financial institution and the beneficiary you name are going to do the rest, bypassing probate court completely. It’s that easy.

These kinds of account have been referred to as the “poor man’s trust.” And it is correct that a (no cost) payable on death account naming avoids probate just like a costly, lawyer-created living trust would.

So long as you are living, the individual you appointed to inherit the capital in a (POD) account has no right to it. Should you need the capital, or just change your mind concerning leaving it to the beneficiary you have named, you can spend it, appoint a different beneficiary, or terminate the account.

Pros and Cons of Payable on Death Accounts

Pros of Payable on Death Accounts

  • They’re easily created.
  • There are no restrictions on how much money you can leave that way.
  • Naming a beneficiary for a financial institution account is free nothing.
  • It’s easy for the beneficiary to declare the capital after the original owner passes away.

Cons of Payable on Death Accounts

  • You are unable to name an alternate beneficiary.

Payable-on-Death Account or Trust?

POD accounts go by various names in various places. Your financial institution, for instance, may reply to your petition for a payable-on-death account by giving you a document permitting the establishment of something known as a “Totten trust.” These financial institution accounts are also sometimes known as a tentative trust, informal trust, or revocable bank account trust. You might see your account called an ITF account, or “in trust for.”

Extra FDIC Coverage for POD Accounts

If you put a POD account in place, you can increase your coverage from the FDIC at a specific institution. It’s commonly known that the Federal Deposit Insurance Corporation insures each individual’s accounts at financial institutions up to $250,000. So, when you have financial institution accounts or CDs at a specific institution that combined are worth $250,000, you’ve hit your FDIC coverage limit at that institution. When you open another account in your name, it would not be covered.

When, on the other hand, you opened a secondary account with a Payable-on-Death beneficiary, that account is going to be individually insured, again, up to $250,000—so, in a way, your coverage is twofold. To keep track of FDIC coverage concerning your accounts, go to the FDIC’s handy “Electronic Deposit Insurance Estimator.”

Creditors and Your Spouse’s Rights

You can’t deceive creditors or your family with POD accounts—avoiding probate does not mean avoiding your legal responsibilities. So, when you don’t place enough other assets to pay your debts and taxes or for the support of your spouse and minor children briefly, a POD bank account (or any other assets that transfers outside probate) might be subject to the claims of creditors or members of your family.

Your spouse might also have rights. When you live in a communal property state, your spouse (or your documented domestic partner) is most likely presently the legal owner of a half interest of your account, even when the account is solely in your name. If you contributed capital, you earned when married, that capital and the interest gained on it is communal property, and your spouse is half owner of it. (Not all is communal property: capital acquired prior to your marriage, or inherited or were given individually, is your individual property unless it’s been combined with communal property.)

When the capital in your account is communal property, and you wish to appoint someone that is not your spouse as the payable-on-death beneficiary for the entire account, it’s wise to get your spouse’s written approval. In other respects, your spouse could declare a claim for half of the capital in the account at your passing, leaving your beneficiary you appointed with only half.

In other (non-communal property) states, a surviving spouse that isn’t satisfied with what they inherited may be able to claim a portion of the capital the deceased spouse left to another person. It’s uncommon, though, that a spouse heads to court for claiming assets.

How the Beneficiary is Able to Claim the Capital

The POD payee you appoint has no rights to the capital as long as you are living. Following your passing, all a POD beneficiary is required to do to claim the capital is present the financial institution with a certified copy of the death certificate and proof of their identity. When the account was a joint account initially, the financial institution is required to see the death certificates of all the initial owners. The financial institution records are going to demonstrate that the beneficiary is permitted to whatever capital is in the account. The financial institution is not going to require anything from the probate court. Subject to state law, there might be a short waiting period prior to the payee collecting the funds.


  1. Mary Randolph, J. D. (2020, November 3). Payable-on-death (POD) accounts: The basics. Retrieved March 29, 2022, from

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