What is a Payable on Death (POD) Account?

A Payable on Death (POD) account is a financial account that allows the account holder to designate one or more beneficiaries who will receive the funds upon their death, bypassing probate. These accounts are commonly used for checking accounts, savings accounts, certificates of deposit (CDs), and money market accounts.

POD accounts offer a simple and efficient way to transfer assets directly to heirs without going through the often lengthy and expensive probate process.

How Payable on Death (POD) Accounts Work

1. Account Holder Designates a Beneficiary

When setting up a POD account, the account holder must formally designate one or more beneficiaries with their bank or financial institution. This process typically involves:

• Completing a beneficiary designation form provided by the bank.
• Providing the legal name, contact information, and Social Security Number (SSN) of each beneficiary.
• Specifying how funds should be divided if multiple beneficiaries are named.
• Updating the designation as needed—account holders can add, remove, or change beneficiaries at any time during their lifetime.

This designation ensures that when the account holder passes away, the named beneficiaries automatically inherit the funds without legal complications.

2. No Access Until Death

Unlike joint bank accounts, where co-owners have immediate access to funds, a POD beneficiary has no legal rights or control over the account while the original owner is alive. The account holder:

• Maintains full control over deposits, withdrawals, and investments.
• Can continue to use, spend, or manage the funds as they wish.
• May change beneficiaries at any time without notifying them.

This means that a named POD beneficiary cannot withdraw money, make decisions about the account, or claim ownership until the account holder passes away.

3. Funds Transfer Upon Death

Upon the death of the account holder, the designated beneficiary can claim the funds by providing proof of death and completing the necessary paperwork. The process typically involves:

• Submitting a certified death certificate to the bank or financial institution.
• Filling out a claim or beneficiary request form to initiate the transfer.
• Presenting a valid government-issued ID to verify identity.
• If multiple beneficiaries exist, the funds are usually divided equally unless specified otherwise by the account holder.

Unlike assets that must go through probate, the transfer is often quick, taking just a few weeks, depending on the bank’s policies.

4. Bypasses Probate

One of the biggest advantages of POD accounts is that they completely bypass probate, the court-supervised process of distributing assets from a deceased person’s estate. Since the funds are transferred directly to the beneficiary:

• There is no delay—beneficiaries avoid the often lengthy and costly probate process.
• The account balance is not subject to public records like probate assets, maintaining financial privacy.
• The beneficiary can immediately access the funds, which can be crucial for covering expenses such as funeral costs, medical bills, or other urgent financial needs.

However, while POD accounts avoid probate, they are still considered part of the estate for tax and debt purposes in some cases. If the estate has outstanding debts or taxes, creditors may still have claims against POD accounts.

By understanding how POD accounts work, account holders can efficiently plan their estate, ensuring their financial assets are passed on smoothly to their loved ones without unnecessary legal hurdles.

Benefits of Using POD Accounts in Maryland Estate Planning

Avoids Probate

Maryland probate can be time-consuming and expensive. POD accounts streamline asset distribution, ensuring beneficiaries receive funds promptly.

Maintains Control During Lifetime

The account owner retains complete access to and control over the account while alive.

Simple and Cost-Effective

Setting up a POD designation is typically free and requires minimal paperwork. Unlike a trust, it does not involve complex legal fees.

Privacy Protection

Unlike probate, which is a public process, POD accounts allow assets to pass privately to beneficiaries.

Potential Drawbacks & Considerations

Conflicts with a Will

POD designations override any instructions in a will regarding the same assets. This can cause disputes if estate plans are not coordinated properly.

Creditor Claims & Taxes

While POD accounts bypass probate, they may still be subject to estate taxes or creditor claims, depending on the size of the estate.

Multiple Beneficiaries

If there are multiple beneficiaries, financial institutions may divide the funds equally, which may not align with the account holder’s broader estate plan.

POD Accounts vs. Other Estate Planning Tools

Best Practices for Managing POD Accounts in Maryland

• Review Beneficiary Designations Regularly – Life events such as marriage, divorce, or the birth of a child may necessitate updates to your POD accounts.
• Coordinate with Your Estate Plan – Ensure POD designations do not conflict with your will, trust, or overall estate planning strategy.
• Communicate With Beneficiaries – Inform them about the account to avoid confusion or delays in accessing funds.
• Consider Alternatives for Larger Estates – If managing a large estate, consider a trust to provide greater control over distributions and creditor protections.

Final Thoughts

Payable on Death (POD) accounts are a valuable estate planning tool in Maryland, offering a simple, cost-effective, and efficient way to transfer assets directly to beneficiaries. However, they should be carefully integrated into a comprehensive estate plan to avoid conflicts and ensure that all assets are distributed according to your wishes. Consulting an estate planning attorney can help tailor POD accounts to your unique financial situation.

Contact Us for Maryland Probate Attorney Services

While Payable on Death (POD) accounts offer a simple way to transfer assets, they should be carefully integrated into your overall estate plan to avoid potential conflicts and ensure your wishes are carried out effectively. If you have questions about setting up POD accounts, updating beneficiary designations, or coordinating them with other estate planning tools, consulting an experienced Maryland estate planning attorney is highly recommended.

At Blackford & Flohr, we specialize in helping individuals and families create comprehensive estate plans that protect their assets and provide peace of mind. Contact us today to schedule a consultation with a Maryland probate lawyer and ensure your financial future is in good hands.