A beneficiary on a bank account is a person (or trust, estate, or charity) you name to receive the money in that account when you die. Banks label this a Payable on Death, or POD, designation, and it works as a direct instruction: when the bank receives proof of your death, it transfers the balance to whoever you named, without probate. You can add a POD to checking, savings, money market, and certificate of deposit accounts, usually at no cost.1Legal Information Institute. POD
What the Designation Actually Does
While you’re alive, the POD sits dormant. You keep full ownership of the account, can spend every dollar in it, close it, or change your mind about who inherits. The person you named has no access, cannot view your balance, and has no legal claim to the money. Lawyers describe their position as a “mere expectancy,” meaning nothing becomes real until you’ve died and the bank has confirmed it.
After your death, the account skips probate entirely. Without a POD, a bank balance becomes part of your probate estate and gets distributed under court supervision according to your will or state intestacy law, a process that commonly runs months and consumes a percentage of the estate in fees. A POD replaces that with a direct transfer from bank to beneficiary.
Setting Up a Beneficiary on Your Account
Banks are required by federal rule to collect identifying information for anyone attached to an account, so before you fill out the form, gather your beneficiary’s full legal name as it appears on their ID, date of birth, Social Security number, and current mailing address.2eCFR. 31 CFR 1020.220 – Customer Identification Program Requirements for Banks The Social Security number lets the bank verify identity later and lets it report any post-death interest to the IRS.
Most banks now let you add or change a POD online through your secure banking portal, usually with a multi-factor authentication step. You can also handle it in person at a branch, and some banks want the signature witnessed or notarized when you make changes there. After the change goes through, the bank should send a confirmation or updated account summary. Check the spellings, the numbers, and any percentage split against what you meant to enter, because a mismatch between the POD form and the beneficiary’s ID at claim time can delay the payout.
Keep a copy of the confirmation somewhere your heirs can find it. Banks do not notify the people you name, so unless you tell your beneficiary the designation exists, they may not know to ask about it after you die.
You can change or remove the designation at any time without anyone else’s permission. The bank follows the most recent valid instruction on file, and the current beneficiary has no say in the change and no right to be notified.
Naming More Than One Person
You can usually name several beneficiaries and assign each a percentage of the balance, but not every bank supports uneven splits. Bank of America, for example, divides funds equally among all named beneficiaries regardless of how many you list.3Bank of America. Beneficiaries FAQs: Payable on Death (POD) Beneficiary If you want an unequal split, confirm the bank’s POD form allows it before assuming.
Contingent beneficiaries (a backup if your primary beneficiary dies first) are also institution-dependent. Some banks offer only primary slots. Ask specifically if a backup matters to you, and revisit your designations after any major life event: marriage, divorce, birth, or a death in the family. An outdated POD sends money to the wrong person as reliably as a well-maintained one sends it to the right one.
Minors, Trusts, and Charities
You can name a minor child, but a child under the age of majority cannot legally manage the funds. The bank generally will not release money directly to a minor, so a court-appointed guardian or a custodian under the Uniform Transfers to Minors Act ends up controlling it until the child reaches the age set by state law.4Social Security Administration. Uniform Transfers to Minors Act If you want more control over how and when a child receives the money, naming a revocable living trust as the POD beneficiary is usually the better route. The bank will typically want the trust’s full legal name, the trustee’s information, and possibly the trust’s taxpayer identification number.
Many banks also allow charities, estates, and other entities as POD beneficiaries, though policies vary. Ask what your bank’s form accommodates.3Bank of America. Beneficiaries FAQs: Payable on Death (POD) Beneficiary
Joint Accounts and POD
A joint account with rights of survivorship already has an inheritance rule built in: when one co-owner dies, the survivor becomes sole owner of the whole account. A POD designation does not override that. Your named beneficiary only receives the funds after the last surviving co-owner has died.
That produces a wrinkle worth understanding. Once you’re the first to go, the surviving co-owner has complete control. They can spend the money down, change the POD to someone else, or close the account. Your original beneficiary has no protection against any of that, so if a joint account holds money you want a specific person to inherit, the outcome depends on your co-owner leaving the designation in place.
How POD Beneficiaries Expand Your Deposit Insurance
Naming beneficiaries also increases how much of your money is federally insured. A standard single-owner bank account is insured up to $250,000 by the FDIC. When you add POD beneficiaries, coverage scales up to $250,000 per beneficiary, capped at $1,250,000 per owner at a single bank once you name five or more.5FDIC.gov. Trust Accounts
- 1 beneficiary: $250,000
- 2 beneficiaries: $500,000
- 3 beneficiaries: $750,000
- 4 beneficiaries: $1,000,000
- 5 or more beneficiaries: $1,250,000
The FDIC combines all your trust-type deposits at the same bank into one calculation, so a POD savings account and a formal revocable trust checking account with the same beneficiaries at the same institution do not stack their coverage. The formula is set by 12 CFR 330.10.6eCFR. 12 CFR 330.10 – Trust Accounts
Credit unions work the same way under the NCUA. Beginning December 1, 2026, updated share insurance rules use the same per-beneficiary calculation, capped at $1,250,000 per owner per federally insured credit union.7MyCreditUnion.gov. Trust Rule Fact Sheet: Changes in NCUA Share Insurance Coverage
Claiming the Money
After the account holder dies, the beneficiary contacts the bank with two documents: a certified copy of the death certificate and a valid government-issued photo ID. The bank checks the ID against the POD records and releases the funds, usually within a few business days. It will either cut a check, transfer the balance into an account the beneficiary already holds, or open a new account in the beneficiary’s name, then close the deceased’s account. No court order, no executor approval, no probate waiting period.
When more than one beneficiary is named, each has to present their own ID and death certificate copy independently, and the bank distributes each share separately.
If a Beneficiary Dies Before You
The POD does not automatically pass to the beneficiary’s own heirs. What happens next depends on the bank’s policies and your state’s law. With multiple beneficiaries, some banks redistribute a deceased person’s share among the survivors; others let that share fall into your probate estate. If your sole beneficiary predeceases you and you never update the form, the account most likely ends up in probate, distributed under your will or your state’s intestacy rules, which is the outcome the POD was meant to prevent.3Bank of America. Beneficiaries FAQs: Payable on Death (POD) Beneficiary This is the most common failure mode: the account holder sets a POD once and never looks at it again. Review yours every year or two, and always after a death in the family.
Taxes on What You Inherit
Money received from a POD account is not taxable income to the beneficiary. Inherited property, including cash from a bank account, is excluded from the recipient’s gross income under federal law, so no 1099 gets issued for the balance and you do not report it as earnings.
Interest the account earns after the owner’s death but before the funds are distributed is different. That interest is taxable to the beneficiary, the bank reports it to the IRS, and it belongs on the beneficiary’s return for the year received. The amount is usually small when the transfer moves quickly.
The balance still counts as part of the deceased person’s estate for federal estate tax purposes, even though it skipped probate. For 2026, the federal estate tax exemption is $15,000,000 per person, so estates below that owe no federal estate tax.8Internal Revenue Service. What’s New – Estate and Gift Tax Most POD account holders never approach that threshold. Some states impose their own inheritance or estate taxes with lower thresholds, so beneficiaries in those states should check state-level rules.
Limits: Creditors and Spouses Can Still Reach POD Funds
POD accounts bypass probate. They do not bypass the deceased’s debts. If the rest of the estate cannot cover outstanding debts, taxes, or legally required support for a surviving spouse and minor children, creditors may be able to reach POD funds. Some states have adopted versions of the Uniform Probate Code that explicitly let creditors pursue non-probate transfers when the probate estate falls short. If the deceased carried significant debt, a beneficiary would be wise to consult an attorney before spending the money.
Spousal rights are the other limit. In community property states, a surviving spouse generally has a half-interest in assets acquired during the marriage, and a POD naming someone else does not automatically override that interest. Even outside community property states, many jurisdictions give a surviving spouse the right to claim an “elective share” of the estate that can reach non-probate assets like POD accounts. If you’re married and plan to name someone other than your spouse, your state’s spousal protection rules control whether that plan will hold up.