How Payment on Death Bank Accounts Work and Who Gets the Money
What a Payment on Death account is and how it bypasses probate
A Payment on Death (POD) account is a bank account with a named beneficiary who receives whatever money is left in it when you die. The bank transfers the funds directly to that person—no probate court, no lawyer, no waiting. You keep full control of the account while you're alive: you can spend the money, change the beneficiary, or close the account entirely.
The key difference from a will is timing and cost. A will goes through probate, which is a court process that can take months or years and costs money in legal fees. A POD account skips that step. The moment the bank receives a death certificate, it releases the balance to whoever you named.
POD accounts are sometimes called "Totten trusts" in legal language, but the bank will call it a POD account or a beneficiary account. The mechanics are the same: you own it now, someone else owns it after you die.
Key Takeaways
- You name a beneficiary when you open the account, and that person receives the full balance when you die, without probate court involvement.
- You can change the beneficiary or close the account at any time while you're alive—the beneficiary has no legal claim to the money until you die.
- The bank needs a death certificate and proof of the beneficiary's identity before releasing funds, which usually takes one to four weeks.
- A POD account does not reduce your taxable estate, so it will not help with federal estate taxes if your total assets are very large.
- If you name a minor as beneficiary, the bank may require a court-appointed guardian or conservator to claim the money on their behalf.
How to set up a Payment on Death account
Most banks offer POD accounts as a standard option when you open a checking or savings account. You do not need a lawyer or any special paperwork beyond what the bank provides. When you open the account, the bank will ask you to name a beneficiary and provide their full legal name and Social Security number or tax ID.
If you already have a regular bank account, you can usually add a POD beneficiary by visiting your branch or calling the bank's customer service line. Ask to add a "payable on death" beneficiary to your account. The bank will give you a form to sign. Some banks let you do this online through your account settings, though you may still need to sign a paper form and return it by mail.
You can name one person or multiple people. If you name more than one, the bank will ask how the money should be split—equally, or in percentages you specify. If you name two people equally and do not specify percentages, most banks will split the balance 50/50 when you die.
What happens to the account after you die
When you die, your family or the person handling your affairs needs to contact the bank and provide a certified copy of your death certificate. The bank will verify the beneficiary's identity (usually with a driver's license or passport) and confirm that the account is still in your name and has not been changed.
The bank then transfers the full balance to the beneficiary's account or issues a check. This process usually takes one to four weeks, depending on how quickly the bank processes the paperwork and whether there are any holds or complications. Some banks are faster than others, and some require the beneficiary to come to a branch in person.
If you named multiple beneficiaries, each one receives their share at the same time. If one beneficiary dies before you do, that person's share typically goes back into your estate (and is handled through your will or the state's intestacy laws), unless you named a contingent beneficiary to replace them.
When a POD account does not work the way you expect
If you name a minor child as beneficiary, the bank will not release the money directly to them when you die. Instead, the money stays frozen until a court appoints a guardian or conservator to manage it on the child's behalf. This can take weeks or months and may require a lawyer. To avoid this, name an adult you trust, or name the child's parent or guardian as beneficiary.
If you name someone who dies before you do and you never update the account, the money does not automatically go to that person's heirs. Instead, it becomes part of your estate and is distributed according to your will or your state's intestacy laws. Update your beneficiary whenever a major life event happens—marriage, divorce, birth of a child, or death of the person you named.
A POD account also does not reduce your taxable estate for federal estate tax purposes. If your total assets are large enough to owe federal estate taxes (over $13.61 million in 2024, though this amount changes yearly), the POD account balance will still be counted. A POD account is useful for avoiding probate, not for tax planning.
POD accounts versus other ways to pass money to someone
A joint account with right of survivorship is different from a POD account. On a joint account, both people own the money while you're both alive, and the survivor automatically owns it all when one person dies. This means the other person can spend your money or take out loans against it while you're alive. A POD account keeps the money entirely yours until you die.
A living trust is more complex and usually costs money to set up, but it can hold multiple types of property (bank accounts, real estate, investments) and passes all of it to your beneficiaries without probate. A POD account only works for one bank account at a time. If you have a house, investments, and multiple accounts, a living trust may be more efficient.
A will goes through probate court, which is slower and more expensive, but it lets you name a guardian for minor children and can handle complicated situations (like leaving money to someone who has a disability and receives government benefits). A POD account cannot do any of that.
What to tell your beneficiary and what documents to keep
Your beneficiary does not need to do anything while you're alive. But they should know the account exists, which bank it is at, and roughly how much money is in it. If they have no idea, your family may not find the account after you die, and the money could sit unclaimed for years.
Keep a list of your bank accounts, including the account number and the name of the beneficiary you named. Store this list somewhere your family can find it—in a safe deposit box, with your will, or with a trusted family member. Include the bank's phone number and the branch address. When you die, this list will save your family hours of searching and calling.
If you change your beneficiary, ask the bank for written confirmation of the change. Keep that confirmation with your important documents. Banks sometimes make mistakes, and having proof of what you requested protects your beneficiary later.
Frequently Asked Questions
Can I change or remove the beneficiary after I set it up?
Yes. You can change the beneficiary or remove the POD designation entirely at any time while you're alive. Contact your bank and ask to update the beneficiary on file. The bank will give you a form to sign. The change takes effect immediately, and the old beneficiary has no claim to the money.
What if I die without naming a beneficiary?
The account becomes part of your estate and goes through probate like any other asset. Your will or your state's intestacy laws determine who gets it. This is slower and more expensive than a POD account, which is why naming a beneficiary is worth doing when you open the account.
Does the beneficiary have to pay taxes on the money they receive?
No federal income tax is owed on money received from a POD account. The money is not considered income to the beneficiary. However, if the account earned interest before you died, that interest may be taxable to your estate. Your beneficiary should keep the bank's paperwork showing how much interest was earned.
Can a creditor or debt collector take money from a POD account after I die?
In most states, no. Once the money passes to the beneficiary, it is protected from your creditors. However, some states allow creditors to claim against POD accounts in certain situations, particularly if you die with unpaid medical bills or estate debts. The rules vary by state, so ask your bank or an attorney in your state if you have significant debts.
What if the beneficiary is in another country?
The bank can still transfer the money, but the process may take longer and may require additional documentation, such as proof of the beneficiary's identity and tax status. Some banks have restrictions on international transfers. Contact your bank to ask what paperwork they need before you die, so your beneficiary knows what to expect.