What Is Payable on Death (POD)?

A bank account with a named beneficiary is a payable-on-death (POD) account. Also known as a Totten trust, a POD names the individ🏅ual or entity♏ the account holder wants to receive the financial asset.

A payable-on-death (POD) account overrides a 澳洲幸运5开奖号码历史查询:last will. If a POD account has one individual named as the beneficiary, and the will lists another individual as a beneficiary, the POD-designated beneficiary prevails.

Designating a POD Account

An individual with a checking or savings account, security deposits, savings bonds, or a 澳洲幸运5开奖号码历史查询:certificate of deposit (CD) can designate a beneficiary who will inherit the money in the account after death. People who opt for POD accounts do so to keep their money out of 澳洲幸运5开奖号码历史查询:probate court when they pass away. Designating a beneficiary is a free service where the account holder notifies their bank and completes a benefꦚiciary designation form.

A significant benefit of POD accounts is that an account owner can increase their coverage limit under the 澳洲幸运5开奖号码历史查询:Federal Depositꦚ Insurance Corp. (FD🔯IC). The standard coverage limit for an individual’s assets at a particular financial institution, including checking and savings accounts, 澳洲幸运5开奖号码历史查询:money market accounts, and CDs, is $250,000.

Since a POD is a 澳洲幸运5开奖号码历史查询:revocable living trust that has someone else with a beneficiary interest on the account, the FDIC provides up to $1,250,000 coverage on up to five accounts at a single bank where each account has a different beneficiary. Each beneficiary cannot be covered for more than $250,000. Instead of saving $1,250,000 in one account, which will only be insured for up to $250,000, having multiple POD accounts can increase an account holder’s coverage by up to five times the standard limit.

Beneficiaries

Upon the account holder's death, the beneficiary automatically becomes the account owner, bypassing the account holder’s estate and skipping probate completely. Their POD account may be subject to claims by 澳洲幸运5开奖号码历史查询:creditors and the government if the owner of a POD account dies with unpaid debts and taxes. The estate's executor may f♔ind it difficult to settle these expenses using POD accounts.

If the account was jointly owned by more than one person, a named beneficiary cannot access the funds until the last owner dies. In this case, the assets in the account will be turned over to the beneficiaries named by the last surviving owner. If the account holder lives in a 澳洲幸运5开奖号码历史查询:community property state, their spouse can claim half of the assets in the POD account, except those acquired before marriage or inherited.

A POD account can have more than one beneficiary. However, state law may only permit an equal distribution of funds in a POD account. Naming multiple beneficiaries can complicate dividing the proceeds from complex financial instruments, such aﷺs bonds. 🐎Account holders cannot name alternate beneficiaries. If the beneficiary dies before the account holder, the assets are automatically transferred to an estate or will.

The Bottom Line

POD account designations on bank accounts help avoid the costs and delays involved with probate court. Individuals can add this step during their estate planning.