When an account is designated as "payable-on-death," the account owner specifies one or more beneficiaries to Inherit the account's funds after their death.
This designation means the account can bypass Probate and be given directly to the named beneficiaries, avoiding delays and costs associated with probate.
Examples of payable on death assets include:
Bank accounts: Checking, savings, and money market accounts; the beneficiary will receive the account balance when the account owner passes away.
Certificates of deposit (CDs): Similar to bank accounts, CDs can be designated as POD accounts. The beneficiary will receive the remaining balance of the CD upon the account owner's death.
Investment accounts: Some brokerage and investment accounts, such as stocks, bonds, individual retirement accounts (IRAs), 401ks and Annuities, can be designated as POD accounts. The beneficiary will receive the account balance or remaining payments upon the account owner's death.
Life insurance policies: Many life insurance policies allow the policyholder to name a beneficiary who will receive Death Benefits upon their death.
Property: Some states allow property (houses, vehicles, boats, etc) to be designated as Transfer-on-Death and they function similarly to POD accounts; upon the owner's death the designated beneficiary inherits the property without the need for probate.
Note: designated beneficiaries of a POD account will inherit assets regardless of what may be specified in the account owner's Will.
"Payable-on-Death sometimes used interchangeably with "Transfer-on-Death" (TOD) because they are both methods used to transfer assets, but TOD is commonly used for assets like stocks and vehicles, while POD is more often used for financial accounts such as bank accounts and retirement accounts.