Legal Definitions - pay-on-death account

A pay-on-death (POD) account is a type of financial account, such as a savings account, checking account, or certificate of deposit, where the owner designates one or more beneficiaries to receive the funds directly upon the owner's death. This arrangement allows the money to be transferred to the named beneficiaries without going through the often lengthy and public probate court process. During their lifetime, the account owner maintains complete control over the funds, including the ability to make withdrawals, change beneficiaries, or close the account entirely. The designated beneficiaries have no legal rights or access to the funds until the account owner passes away.

• A parent setting up a college fund.

  Sarah opens a savings account specifically to save for her daughter Emily's future college expenses. She designates Emily as the pay-on-death beneficiary. If Sarah were to pass away before Emily needs the funds, the money in that account would transfer directly to Emily, avoiding probate and ensuring the funds are available for their intended purpose without delay. This illustrates a POD account because the funds pass directly to the named beneficiary upon the owner's death, outside of the probate process.

• A couple managing their joint finances.

  Mark and Lisa have a joint checking account for their household expenses. To ensure a smooth transition of funds if both were to pass away simultaneously, or if one passes and the other later passes, they name their two adult children as equal pay-on-death beneficiaries. This means that upon the death of the last surviving account owner, the remaining balance would be distributed directly to their children, simplifying the process of settling their estate. Here, the POD designation ensures that the funds bypass probate and are distributed efficiently to the specified heirs.

• An individual supporting a charity.

  David, a passionate supporter of a local animal shelter, decides to leave a portion of his assets to the organization. He opens a separate certificate of deposit (CD) and names the animal shelter as the pay-on-death beneficiary. This ensures that upon David's passing, the funds from that specific CD are directly transferred to the shelter, providing a clear and efficient way for his charitable intentions to be fulfilled without the need for the shelter to go through probate court. This example demonstrates how a POD account can be used for charitable giving, ensuring the funds reach the intended organization directly and without delay.