Account that is Payable on Death

Death Benefit Accounts Save your bank accounts from being probated. State law in the United States recognizes a special category of bank account known as a payable on death account, or POD account. In addition to American savings bonds, POD accounts can be opened for checking, savings, money market, and certificate of deposit accounts. A POD account enables the money in the account to pass directly to the beneficiaries the account owner names after the account owner passes away. The beneficiaries of the POD account will typically only need to present the bank manager with the owner's original death certificate in order to take over the account after the owner passes away because it will occur outside of probate. The beneficiaries listed by the account owner on the beneficiary designation form on record with the bank will then receive the funds still in the POD account. It is important to understand that regardless of what the POD account owner's last will and testament or revocable living trust says, the bank account will pass to the POD beneficiaries.

A POD Account's Rights Holders

The POD account's owner is the only person with access to and control over the funds held in the account while the owner is still alive. The POD account will not be accessible to or under the control of the individuals the owner names as the recipients of the funds in the account after his or her passing. Furthermore, while still alive and able to make changes to the account, the owner has the right to alter the beneficiaries of the POD account at any time.

The maximum number of owners who can access a POD account

More than one person can create POD accounts. When one of the owners dies, the remaining funds in the POD account are paid to the beneficiaries the last surviving owner designated. A POD account can be accessed by two, three, or even more people while any one of the owners is still alive.

Beneficiaries of POD Accounts Are Not Required to Receive Equal Payments

If more than one beneficiary is listed, the POD account owner is not required to divide the account equally. Instead, if the POD account owner names more than one beneficiary to receive the assets still in the account after the owner passes away, the beneficiaries will split the account balance according to the percentages the owner specified in the beneficiary designation form.

What Will Happen If a Named Beneficiary predeceases the POD Account's owner?

The money in the account will be divided equally among the surviving beneficiaries if a beneficiary designated by the POD account owner passes away before the account owner. For instance, if an account's owner names four beneficiaries, but only three of them are still alive when the owner passes away and the owner does not change the beneficiary designation, the remaining funds in the account will be divided equally among the three surviving beneficiaries. However, what if the account owner only names one beneficiary, that beneficiary passes away before the account owner, and the account owner never modifies the beneficiary designation? The funds in the POD account will be included in the account owner's probate assets.