If you’re worried about how your assets will get passed down when you die, but you can’t afford a trust right now, a payable upon death account can be another option. 

It’s the simplest way to keep your money out of probate and to ensure the intended parties receive your funds. Like any inheritance, there are rules and regulations you must follow, but for the most part, a payable upon death account is simple to manage. 

What is Payable on Death? 

A payable on death account, otherwise known as a Totten Trust, is a bank account that you designate a beneficiary for upon your passing. It doesn’t have to go through probate. The bank transfers the funds to the named beneficiary after receiving proof of your death. 

Many people use this account to give beneficiaries immediate access to funds. Other payouts, such as life insurance and estate payouts can take months to receive. Since there will be immediate costs your loved ones need to take care of, a POD can alleviate some of that stress. 

What Types of Accounts can be Payable on Death? 

Most accounts you can open at your local or online bank or credit union can be opened or turned into a payable on death account including: 

  • Savings account 
  • Checking account 
  • Money market account 
  • CD 

How Does it Work? 

You can open an account as payable on death or you can ask that a current account you hold at a bank or credit union be turned into a POD. 

The rules and APYs paid on the account typically remain the same, it’s just the ownership that changes. In other words, you simply add a beneficiary to the account. 

The beneficiary doesn’t have any rights to your account or access to the funds while you are alive. You have complete control over the funds and can spend them how you want – there aren’t any rules.  

When you die, the bank will release the funds to the named beneficiary when he/she presents proper ID and your death certificate.  

What if you’re Married? 

There is a catch 22 if you are married and want to set up a POD. Even if the account is in your name only but you live in a community state, your spouse has legal rights to the account upon your death. Even if you named a beneficiary other than your spouse, your spouse has first rights to the funds. 

On the off chance that your spouse wants to leave the funds to someone other than himself/herself, you can have your spouse write a letter of consent agreeing to the POD and the way you are setting it up. 

Can you Change your Mind? 

A payable on death account isn’t set in stone. You can change it as much as you want. This includes changing beneficiaries or even changing the account to a standard account. It doesn’t cost anything to make the changes. 

It’s always a good idea to revisit your estate plan annually to ensure everything is still how you want it since life can change in an instant. 

What about Creditors? 

There’s one time that you can’t ensure your assets will go to your beneficiaries and that’s if you have creditors that you owe, including taxes. If you have legal obligations, those must be settled first. For example, if you don’t leave enough money outside of the POD to cover your tax liability or any mandatory liabilities, the funds will be liquidated for that use first, and any remaining funds will go to your beneficiaries. 

Pros and Cons 

Like any financial account, there are pros and cons to a payable on death account. Here’s what you must know. 


You can Avoid Probate 

Funds you keep in a POD account avoid probate. This can ensure that your loved ones get the full amount of the money you left behind rather than paying probate charges and receiving only a fraction of the funds. This doesn’t mean your other assets won’t go through probate, but POD accounts avoid it. 

You Don’t Need a Lawyer to Create One 

POD accounts are easy to open. They are just like a regular bank account just with a beneficiary designated for the funds upon your death. You get the same FDIC insurance, interest rates, and access to the account as a regular account. 

You can Leave as Much Money as you Want in a POD 

There aren’t any legal limits regarding how much money you can keep in a POD account. This means you can designate as much of your assets as you want for your named beneficiary and ensure that they get the funds immediately (unless there are creditors standing in the way). 

It’s Free 

You don’t have to pay anything to change the designation of your bank account. You just need to notify the bank of the changes. 

You Get Double the FDIC Insurance 

Each consumer gets up to $250,000 in FDIC coverage for their accounts at each bank. If you open another account as a POD, though, the FDIC coverage for that account doesn’t count against the FDIC insurance for your regular accounts. This means you get coverage up to $500,000 if you designate a POD account. 


Beneficiaries can’t Touch the Funds While you are Alive 

This might seem like a benefit, but what if you become unable to make your own decisions or handle your finances? If your loved ones need the funds to provide your healthcare or cover your liabilities, they won’t be able to access the funds yet. 

You Can’t Name Alternate Beneficiaries 

If you don’t name multiple beneficiaries on your POD and your beneficiary dies before you, the funds will become a part of your estate when you die if you don’t change it. 

Are Payable on Death and a Trust the Same Thing? 

A payable on death account is technically a trust – sometimes called a Totten Trust or informal trust. It operates differently than a living trust, though. The Totten Trust refers only to the money in the account. It doesn’t account for any other assets.  

It’s sometimes a good idea to have a living trust for your other assets and a payable on death trust for funds your beneficiaries might need right away. For example, if your life insurance proceeds don’t pay out fast enough, how would your loved ones pay for your final arrangements? 

A POD can give your beneficiaries instant access to funds to take care of what’s necessary right away. It doesn’t cover all your assets, though, so if you have more than a bank account, you should incorporate both a living trust and the POD. 

How to Set Up a Payable Upon Death Account 

Fortunately, it’s easy to set up a POD, unlike most other estate planning procedures. Here’s what you must do: 

Choose your beneficiary 

Before you set up the account, decide who you will name as your beneficiary. It can be multiple people too. Talk to them about it and make sure you have their full legal name, address, and date of birth. 

Decide if you’ll open a new account or make an existing account POD 

Call your bank to find out their procedure. Some banks don’t allow you to change the status of an existing account, which means you’d have to open a new account and transfer funds. 

Go to the bank 

You must open your POD account in person. Your bank will have you fill out a POD designation form and they may have other steps they have you take. Each bank operates differently. 

Create a signature card for your beneficiary 

Once you open the account, create a signature card for your beneficiary. This is what the bank will use when you die to identify your beneficiary before releasing the funds. 

Key Takeaway 

A payable on death account is a great way to give your beneficiaries immediate access to your funds. It’s a form of a trust that doesn’t require your funds to go through probate or to be tied up in any way so your beneficiaries can take care of the immediate costs of your death. 

Most banks offer POD options. Talk to your bank to see how you can set up an account to help your loved ones when you die. 

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