The Pros and Cons of Payable on Death Accounts

One of the most common goals of estate planning is avoiding probate.  Probate is the court supervised process whereby your executor or administrator marshals your assets, pays your debts and then distributes your property when you die.  Probate is a public process that often involves considerable time and expense.  Therefore, avoiding probate allows heirs to receive their inheritance faster, privately, and at lower cost.

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Payable on Death Accounts

Payable on death (“POD”) accounts are a simple, easy to use method to avoid probate.  A POD account is set up signing a POD designation when you open the account naming one or more beneficiaries to receive the assets in the account at your death.  A POD designation can be set up for savings, checking, certificates of deposit, U.S. savings bonds, and investment accounts and you can change your beneficiaries whenever you wish.

After the death of the POD account holder, there is typically a simple claim procedure involving the completion of a claim form, presentation of a death certificate, and proof of identification by the beneficiary, completely avoiding probate.  POD accounts are different than joint accounts in that the named beneficiaries have no access to the accounts during the lifetime of the account holder.


  1. POD accounts are easy to establish;
  2. POD accounts are not subject to probate;
  3. The claim procedure for the beneficiary is usually quick and simple; and
  4. POD accounts are inexpensive because there are no professional fees involved in setting them up or administering them at death.

While POD accounts may achieve the goal of probate avoidance, they are imperfect and incomplete solutions at best when compared to other available estate planning techniques.


  1. POD accounts may not actually avoid probate. If a designated beneficiary predeceases you and you fail to name a new beneficiary before you die, the account will go through probate.
  2. POD accounts do not offer any creditor protection. If the beneficiary is in the middle of a bankruptcy, divorce, or a lawsuit or has existing judgments or liens against him or her, those creditors will be able to reach the proceeds of the POD account in the hands of the beneficiary.
  3. POD accounts are only effective at death and do not provide for access to and management of your assets in the event of incapacity.

A Better Solution

There is a better, comprehensive solution:  a revocable living trust (“RLT”).  Similarly to a POD account, transferring your accounts to an RLT avoids probate.  Unlike a POD account, an RLT can provide for any number of alternate beneficiaries, so your assets avoid probate even if someone predeceases you.  An RLT can also provide long term protection from the creditors of your beneficiaries.  If you become incapacitated due to an accident or illness, your successor trustee can manage the assets in your trust and access your funds to pay for your care and that of your dependents.  A POD account may be good, but an RLT is better.  Both may have a place in your estate plan.

So What Do You Do?

Begin with the end in mind.  Determine your goals and priorities both during your life and at your death.  Anticipate your needs and the needs and challenges your beneficiaries may face.  Consult with an experienced estate planning professional to help you design a customized, comprehensive estate plan that suits your individual goals and needs.

If you want to discuss POD accounts, trusts or any other estate planning strategies, please call or email me to set up a confidential consultation.

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