A payable on death account, or POD account for short, is a special type of bank account that is recognized under state law. A POD account allows for the money remaining in the account when the account owner dies to pass to directly to the beneficiaries named by the account owner. This will happen outside of probate and all that the beneficiaries of the POD account will have to do in order to gain control of the balance of the account after the owner dies is to show the bank manager an original death certificate for the owner. The money remaining in the POD account will then be paid to the beneficiaries named by the account owner in the beneficiary designation form on file with the bank. This will happen regardless of whether or not the POD account owner had a last will and testament and, even if so, what the last will and testament says.
Who Has Access to a POD Account?
While the owner of the POD account is alive, the beneficiaries named by the owner to receive the money left in the account after the owner dies will not have any access to or control over the POD account, only the owner will have access to and control over the money held in the account. In addition, the owner can change the beneficiaries of the POD account at any time while the owner is still alive and competent to make changes to the account.
Can a POD Account Be Owned by More Than One Person?
POD accounts do not have to be established by only one person. Two, three or even more people can have access to a POD account while any one of the owners is still alive, and then when the last owner dies the money remaining in the POD account will be paid to the beneficiaries named by the last surviving owner.
Does a POD Account Have to Be Paid Equally to the Beneficiaries?
If more than one beneficiary is named by the POD account owner to receive the money remaining in the account after the owner dies, then the beneficiaries will receive the balance of the account in equal shares. For example, if four beneficiaries are named, then each will receive 25% of the money remaining in the account, but if only one beneficiary is named, then he or she will receive 100% of the money remaining in the account.
What Happens if a Named Beneficiary Predeceases the POD Account Owner?
If a beneficiary named by the POD account owner predeceases the owner, then the money remaining in the account will be paid equally to the surviving beneficiaries. For example, if the owner names four beneficiaries and one of the named beneficiaries predeceases the owner and the owner doesn't make any changes to the account beneficiary designation, then the money remaining in the account when the owner dies will be paid equally to the three surviving beneficiaries. But what will happen if the owner only names one beneficiary and he or she predeceases the account owner and the owner never changes the beneficiary designation? Then the money remaining in the POD account will become a part of the account owner's probate estate.
Is a POD Account Right For You?
If you are thinking about establishing a POD bank account, then consider the following:
- A POD account is easy to establish. Simply go to your bank or credit union and ask the manager how to open a new POD account or change your existing account into a POD account.
- A POD account will pass to the beneficiaries you name outside of probate. This means that if you name all four of your children as beneficiaries in your last will and testament but only two of your children in your POD account beneficiary designation, then the money remaining in your POD account when you die will only be paid to the two children that you have named in the beneficiary designation. Therefore, you need to be careful to coordinate your last will and testament with the beneficiaries you've named for your POD account.
- You and your spouse can establish a POD account together. This means that after one of you dies, the surviving spouse will have full control of the POD account and, as such, can change the final beneficiaries of the account. If you and your spouse are in a second or later marriage and have children from other marriages, then this means that the surviving spouse can disinherit the children of the first spouse to die.
- You'll need to update the beneficiary designation for your POD account as your life changes. As your life changes, so should the beneficiaries you name to receive your POD account after you die. This is particularly important if a beneficiary you've named predeceases you or falls out of your favor.
- DO NOT name minor beneficiaries to receive your POD account. Minor beneficiaries do not have the legal authority to receive money left in a POD account directly. Instead, a guardianship will need to be established on behalf of the minor until the minor reaches the age of of majority - which is 18 or 21 depending on applicable state law.