Payable on Death Account: How a POD Account Works and How It's Insured

Short answer: A payable on death account (POD account) is a regular bank account with one or more named beneficiaries who get the money when you die, generally without going through probate court. You keep control while you're alive, and you can change the beneficiaries at any time. The FDIC insures POD accounts as trust accounts, up to $250,000 per owner for each eligible beneficiary, with a cap of $1,250,000 per owner at each bank.

What Is a Payable on Death Account?

A payable on death account is a bank account you set up to go to a named beneficiary automatically when you die, without court involvement. That's how TexasLawHelp.org, a legal aid site, describes it. You can name one or more beneficiaries.

The FDIC treats these accounts as informal revocable trusts, which it describes as deposits that pass directly to one or more beneficiaries at the depositor's death without a written trust agreement. Other names for the same idea include "in trust for" (ITF), "transfer on death" (TOD) and Totten trust.

What Does POD Mean in Banking?

POD means payable on death. A POD beneficiary is the person (or charity) who receives the money after the owner dies. A POD beneficiary isn't a co-owner of the account.

TexasLawHelp.org says a POD designation doesn't let the named beneficiary access your funds during your life. As long as you're alive and able to make decisions, you can change the beneficiary, and making or changing the designation is free for both you and the beneficiary.

How Does a POD Account Work?

1. You open or update an account. The bank gives you a form to name your beneficiaries, and you sign it. For FDIC trust-account coverage, the beneficiaries must be named in the bank's deposit account records. Their names don't have to appear in the account title.
2. You use the account as usual. The beneficiary has no access to the money during your life.
3. You can change your mind. You can switch or remove beneficiaries at any time while you're able to make decisions.
4. At your death, the beneficiary claims the money. The Texas State Law Library says the bank will likely ask the beneficiary to fill out a claim, submit a copy of the death certificate and verify their identity.

POD Account vs. Joint Account: What's the Difference?

Adding a POD beneficiary and adding a joint owner are very different choices.

	POD account	Joint account
Does anyone else share ownership while you're alive?	No	Yes. Joint owners share authority and ownership of the funds
Can the other person access the money while you're alive?	No. The beneficiary has no access during your life	Joint owners share authority over the funds
FDIC coverage	$250,000 per owner for each eligible beneficiary, up to $1,250,000 per owner	$250,000 per co-owner

TexasLawHelp.org explains that POD accounts aren't jointly owned accounts, where joint owners share authority and ownership of the funds, and that a POD beneficiary can't access your funds during your life.

Does a POD Account Avoid Probate?

Yes. TexasLawHelp.org says POD bank accounts pass to the named beneficiaries without any court involvement or other probate procedures, even if there is no will or trust. The Texas State Law Library lists POD bank accounts as nonprobate property, which it says skips the probate process completely.

There are a few cautions, using Texas law as an example:

• A will doesn't override it in Texas. TexasLawHelp.org says that if your will conflicts with the POD designation, the POD account controls who receives the funds.
• Estate debts can reach it. The Texas State Law Library says nonprobate assets aren't always fully protected. If the probate assets can't cover the estate's debts, the executor may have to claim nonprobate assets to make up the difference.
• Divorce can cancel a designation. The Texas State Law Library says Texas law often nullifies a beneficiary designation for an ex-spouse, with exceptions such as a designation made after the divorce.
• Some beneficiaries need extra planning. TexasLawHelp.org says it may not be a good idea to name someone who is incapacitated, a minor who can't receive the funds directly, or a person with a disability who receives government assistance that a direct gift could affect. It suggests talking to a lawyer.

State laws differ, so check how these rules work where you live.

How Does FDIC Insurance Work for a POD Account?

This is where a POD designation can make a big difference. The FDIC's standard coverage is $250,000 per depositor, per insured bank, for each account ownership category. A POD account falls in the trust accounts category, which is insured by beneficiary.

According to the FDIC, as of April 1, 2024:

• Each owner is insured up to $250,000 per eligible beneficiary. The FDIC's formula is number of owners × number of different beneficiaries × $250,000.
• The cap is $1,250,000 per owner for all trust accounts at the same bank, reached when you name five or more beneficiaries. You can name as many beneficiaries as you want, but coverage stops growing after five.
• The change applies to both existing and new trust accounts.
• How you split the money doesn't matter. The FDIC says allocations among beneficiaries don't factor into the calculation.

Example from the FDIC: a POD account owned by one person with three children named as beneficiaries is insured for 1 owner × 3 beneficiaries × $250,000 = $750,000.

A common mistake is counting the owner too. The FDIC says coverage is not calculated as owners plus beneficiaries times $250,000. An owner with one beneficiary has $250,000 of coverage, not $500,000.

Who counts as an eligible beneficiary? The FDIC lists a living person, a charitable organization recognized under the Internal Revenue Code, and a non-profit entity recognized under the Internal Revenue Code. Naming an ineligible beneficiary, such as a for-profit business or a pet trust, doesn't add coverage. If no eligible beneficiary is named, the money may be insured as a single account instead.

A few other FDIC rules to know:

• All your trust accounts at one bank are added together. That includes POD accounts and formal living trust accounts.
• Each beneficiary counts once per owner at the same bank, even if they're named on several accounts.
• The FDIC pays the owner, not the beneficiaries, if the bank fails while the owner is alive.
• A beneficiary's death can reduce coverage right away. The FDIC gives a six-month grace period after an owner's death, but not after a beneficiary's death.
• FDIC insurance doesn't cover theft or fraud.

For the full picture of coverage categories, see our guide to FDIC insurance limits.

Is a POD Account Right for You?

A POD designation can be a simple way to pass bank money directly to family or a charity, and it may raise your FDIC coverage at a single bank. TexasLawHelp.org says adding one is free, and you can change it while you're able to make decisions.

A POD designation applies to the account you add it to. If you have a will, a trust or beneficiaries who need special handling, review your POD designations alongside them, and consider talking to an estate planning attorney.

The Bottom Line

A payable on death account lets you name who gets your bank money when you die, generally without probate, while you keep control during your life. Name your beneficiaries in the bank's records, review them after major life events such as a divorce, and remember the FDIC limit: $250,000 per owner for each eligible beneficiary, up to $1,250,000 per owner at each bank. To compare account types, see checking vs. savings accounts and credit union vs. bank, or browse our banking guides.

This article is general information, not legal or estate planning advice.

Frequently asked questions

What does POD mean in banking?

POD means payable on death. It's a designation on a bank account that names who gets the money when the owner dies. The FDIC groups POD accounts with "in trust for" (ITF) and similar accounts as informal revocable trusts, which pass directly to the beneficiaries at the owner's death without a written trust agreement.

Does a payable on death account avoid probate?

Yes. Texas legal guides, for example, say POD bank accounts pass to the named beneficiaries without court involvement or other probate procedures, even if there's no will. The Texas State Law Library notes one caution: if the estate can't cover its debts, the executor may have to claim nonprobate assets to make up the difference.

Can a POD beneficiary take money out while I'm alive?

No. TexasLawHelp.org explains that naming a POD beneficiary doesn't let that person access your funds during your life, and that POD accounts aren't jointly owned accounts, where joint owners share authority and ownership of the funds.

How much of a POD account does the FDIC insure?

The FDIC insures each owner up to $250,000 for each eligible beneficiary, up to $1,250,000 per owner at the same bank if five or more beneficiaries are named. For example, one owner with three children named as beneficiaries is insured up to $750,000. Eligible beneficiaries are living people and IRS-recognized charities and non-profits.

Does a will override a payable on death account?

Under Texas law, no. TexasLawHelp.org says that if a will conflicts with a POD designation, the POD account controls who gets the money. Rules can differ by state, so ask your bank or an estate attorney where you live.

Sources

1. FDIC: Deposit Insurance At A Glance (April 2024)
2. FDIC: Trust Accounts (12 C.F.R. § 330.10)
3. TexasLawHelp.org: Payable on Death Bank Accounts
4. Texas State Law Library: Nonprobate Property

This guide is general information, not personal advice. Your situation may differ, so consider talking with a qualified professional, such as a fiduciary financial adviser, CPA or licensed agent, before making a decision.