Payable On Death Bank Accounts

Paying for a Funeral

Posted on June 15, 2021 by

What are Payable On Death Bank Accounts

A Payable on Death (POD) bank account, also called a “Totten Trust”, is a sort of joint account setup with the intent of directly transferring financial assets to a beneficiary upon the death of the [primary] account holder. 

This can be an important bank account for people who wish to pre-plan a funeral and set aside funds for their family to use in their time of need. With regular checking and savings accounts, a family would not be able to access those funds until after the Estate has been opened and probate began - often months later. 

Benefits of a POD Totten Trust Account

Opting for a Payable On Death (POD) account keeps your money out of probate court after you pass away.

By setting up a POD bank account, it allows for immediate transfer of funds when triggered by the death of the account holder. This in turn provides the beneficiary, who is typically a trusted family member or designated funeral agent, immediate access to those funds to pay for burial, cremation, and other death-care related expenses.

It is important to note that the named beneficiary is not entitled to any of the money in the account while the account holder is still alive. Only upon death does the beneficiary become the owner of the account, bypassing the estate and probate process completely. However, in the event that the owner of a POD account passes away with unpaid debts and taxes, the POD account may be subject to claims by creditors and the government.

How to Use A Payable On Death Bank Account to Pre-Pay A Funeral

POD bank accounts are excellent options for pre-paying for your funeral. Instead of giving the funds to a funeral home or cremation provider, you can set those same funds aside for yourself and your family in a POD account, allowing for greater flexibility on where and how to spend them.

To set up a POD account, an individual with an account at a bank or credit union can simply designate a beneficiary to inherit any money in the account after his or her death. This is a cost-free service offered by the bank on all checking & savings accounts. You can use an existing bank account or set up a new one specifically for the funds you want to set aside for funeral expenses.

In either scenario, the account holder only needs to notify the bank of who the beneficiary is by filling out a beneficiary designation form called a “Totten Trust”. Once completed and submitted, it authorizes the bank to convert the account to a POD account.

Why Payable On Death Bank Accounts Are Good for Funeral Pre-Planning 

In a typical pre-paid funeral, established with a funeral home or cemetery, the business opens a state-approved trust or insurance policy and puts your funds in it for safe-keeping. The funeral home or cemetery is designated as the beneficiary ensuring they receive the funds for the funeral when the time comes. However, if a family prefers to use a different funeral home, moves, or that original funeral home is no longer in business, it gets quite complicated and sometimes impossible for a family to transfer those funds to another provider.

A POD bank account is less messy and offers more flexibility for a family while still allowing the pro-active pre-planner to set aside funds for use by their family.

PODs are much simpler to create and maintain in comparison to trusts and wills. There are other benefits to a POD account, which you can read up on in more detail on Investopedia

Payable on Death bank accounts are a good financial choice for setting aside and “pre-paying” for a funeral, especially if there is already money ready to set aside.

For those who need or prefer more of a payment plan for funding their funeral, an insurance product may be worth considering. Click here to learn more about burial insurance for paying for a funeral.

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