Payable-on-Death” (POD) is a designation used for bank accounts that allow the beneficiary, or the beneficiaries, of the account to receive the assets upon the death of the account holder. POD accounts, also known as Totten trusts, can easily be established by completing the documentation provided by your bank or credit union, which includes providing the financial institution with the legal name of each beneficiary and informing each beneficiary of your choice.

POD accounts have a purpose similar to living trusts, but there is usually no fee associated with establishing this type of account. They are also similar to Transfer-On-Death (TOD) accounts, but deal specifically with checking and savings accounts, savings bonds, security deposits, and other deposit certificates, rather than the stocks, bonds, and mutual funds of a TOD. As with trusts and TOD accounts, assets with the POD designation avoid the probate process when the account holder dies. Probate is the process of settling the estate of the deceased by resolving outstanding claims and dispensing the property within a will, although probate also occurs if there is no will made by the deceased party.

Although the beneficiary has total access to the account upon the death of the account owner, he or she has no claim to the assets before that time. In fact, the account owner can legally spend the money, modify the name of the beneficiary, or even close the account.

Different states enforce different laws when it comes to setting up and performing maintenance on a POD account. Some implement strict rules about how one can make changes to the beneficiary on the account, while others restrict the types of activities one can perform on the account once it is registered as a POD. The bank or credit union that is going to set up the account should have information on the rules of each state. Information about POD accounts and general banking practices can be located on the Federal Deposit Insurance Corporation Web site at FDIC: Insuring Your Deposits.