How to Set Up a Payable On Death Account

Posted by Colton Hoisager on Sep 27, 2022

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Using payable on death (POD) accounts can be an efficient way to ensure the money you have in your personal bank accounts is immediately transferred to a beneficiary of your choosing when you die. 

POD accounts are easy to set up at your financial institutions. All you and your beneficiaries need to do is fill out some paperwork to convert your traditional accounts into POD accounts. In addition to checking and savings accounts, you also can set up payable on death accounts for certificates of deposit, money market accounts, and savings bonds.  

Below we’ll walk you through the steps necessary to set up POD accounts. 

Why Use Payable on Death Accounts 

Settling your estate can be a time-consuming process, even if you have a will and clearly designate which heirs are to receive certain parts of your estate. 

Payable on death accounts streamline the transfer of funds in your checking or savings accounts to your beneficiaries – they even have the legal authority to supersede your will in the event that there’s a conflict among whom you’ve designated as heirs. These funds will bypass the probate process and ensure your beneficiaries have immediate access to cash when you die. This process can be of utmost importance if they have to plan for sudden funeral arrangements and pay for expenses. 

Beneficiaries can’t access the funds while you are still alive, though. They’ll need to go to the bank with a valid government-issued ID and a certified copy of your death certificate in order to have the accounts transferred into their name. There’s no limit on the number of beneficiaries you can designate for your POD accounts, and each beneficiary will get an equal share of the balance of funds in your POD accounts when you die. 

Accounts that can be converted into POD accounts include checking, savings, CDs, IRAs, and investment accounts. If these accounts are co-owned, ownership transfers to the next living owner instead of the beneficiaries. Heirs won’t get any funds until the last living owner dies. 

 Setting Up A Payable Upon Death Account 

You can name any number of individuals, as well as trusts, non-profits, charitable organizations, or companies as beneficiaries. Go to your bank with the following information at the ready: 

  1. For individuals, you’ll need their full legal name, date of birth, address, and Social Security number. 
  2. For other entities, you’ll need the full legal name of the organization, taxpayer identification number, and address. 
  3. Your beneficiary will have to fill out a form called a Totten Trust in order to authorize your financial institution to create the POD account and have them named as beneficiary.  

You also might be able to set up POD accounts online – check with your financial institution. After you’ve converted your traditional accounts into payable on death accounts, you still are free to add or withdraw funds or even close the accounts entirely. You don’t need your beneficiary’s consent to make any of these changes since you are the full legal owner and manager of the account. 

The Bottom Line 

POD accounts are considered an informal form of a revocable living trust. You have the flexibility to make changes to POD accounts at any time, including changing beneficiaries or canceling the POD arrangement. Payable on death accounts are a way for loved ones to quickly access cash when you die since the funds are immediately payable when you die. 

Consulting with a certified financial planner can help you learn more about this type of arrangement and how it can fit in with the overall estate planning process. 

 

This material is for general information and educational purposes only. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor.    

Realized does not provide tax or legal advice. This material is not a substitute for seeking the advice of a qualified professional for your individual situation. 

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