POD accounts are a simple way to provide for quick and easy access to bank accounts in the event of the account holder's death. Also known as payable on death accounts or Totten trusts, the service is free and available at a number of banks, credit unions, and savings and loan institutions. Setting up this type of account is one way of ensuring that funds that are needed to take care of immediate expenses can be accessed without waiting for wills to be probated and assets to be released.
Setting up a payable on death account involves designating a beneficiary. The process involves requesting that the account be set up with a local banking institution. In most cases, there is no cost associated with this procedure; all that is required is that the account holder fill out a simple form, identify the bank accounts the person wishes to have tied to the POD account, provide the name and contact information for the beneficiary, and add his signature to the form. In the event of the death, the beneficiary will have full access to any savings and checking accounts specified on the form.
This type of account is different from simply opening a joint account. With a joint account, the second individual has authorization to withdraw funds while the primary account holder is still alive. By contrast, the POD account setup will only allow the beneficiary access to the funds once the death of the primary account holder is established to the satisfaction of the financial institution.
Along with checking and savings accounts, the terms of the POD agreement may also allow access to certificates of deposit and other securities that are associated with any accounts established with the bank and in the name of the primary account holder. Policies on securities will vary somewhat from one jurisdiction to another. Bank personnel can provide information on what restrictions, if any, are in place when it comes to covering existing accounts.
While a POD account is a good solution for some situations, this type of arrangement is not ideal for everyone. There is the possibility of a delay in allowing access to the assets included in the agreement, especially if there are tax issues pending. This is especially true if the local jurisdiction imposes estate taxes, since they generally must be paid out of existing assets first. Once this is done, the beneficiary will have access to any remaining assets included in the POD arrangement.