Payable on Death Account vs. Beneficiary


You’re wondering about what exactly a payable on death account is and how it relates to your needs. What do you need to know about designating beneficiaries, unexpected incapacitation, and backup beneficiaries?

When it comes to estate planning law, learning new definitions can be intimidating. Fortunately, a simple explanation of the terms will help clear things up.

What is a Payable on Death Account?

A POD account allows you to designate a beneficiary (or multiple) to receive the money in your account when you pass. As the owner of the account, the money is yours to do with as you please while you’re still alive. Once you pass, the beneficiaries you decided on may withdraw the funds without probate.

You can choose anyone to be your account beneficiary, from your children to your best friend. Some banks or financial institutions will require you to provide the beneficiary’s social security number. So, it’s a good idea to let your intended beneficiary know that you’re designating them as such.

Beneficiary Rules and Definitions

Before you choose a beneficiary, it’s important to be aware of your bank account beneficiary rules, along with specifications for a primary vs. contingent beneficiary. To help you understand this more clearly, let’s look closer at each of these terms and how they differ from each other.


A beneficiary is an entity, trust, or person that the account holder appoints to receive some (or all) of the assets in the holder’s account once they die.

Primary Beneficiary

When you invest in an insurance policy, 401(k), or another beneficiary-named financial account, you should name the institution or person you wish to receive your assets once you pass. These will be your primary beneficiaries.

Contingent Beneficiary

This refers to the institution or person that receives the assets in your account if your primary beneficiary isn’t able or refuses to do so. If your primary beneficiary passes before you can’t legally accept the assets, or declines their inheritance, the contingent (secondary) beneficiary is next in line.

Multiple Beneficiaries

You don’t have to choose only one primary beneficiary and one contingent beneficiary. You can select percentages for each, as you see fit. For instance, you could designate your wife as your primary beneficiary for the entire account, then select two close relatives to split the account as contingent beneficiaries.

How to Claim Deceased Bank Accounts

Access to the payable on death account transfers to the living beneficiary once the account holder passes. The account should be set up for easy access once you supply the necessary documentation. As the primary beneficiary, you only need to show the deceased person’s death certificate and proof of your identity to the financial institution. 

This process is usually quick, but some states might have a slight delay, depending on the local laws.

Unexpected Illness or Injury

The assets in a POD account only transfer upon the account holder’s death. If the account owner becomes incapacitated, their family will most likely have to go to court to access the assets. A payable on death account doesn’t function as a joint account while the account owner is still alive.

Keep in mind, even if you’re still young and healthy, unforeseen illnesses and accidents can always occur. And your named beneficiaries won’t be able to access your assets to pay your medical bills without getting the court involved.

What if the Beneficiary has Credit Problems?

While the account holder is alive, their POD account is safe from the beneficiary’s creditors. Once the account owner passes, however, the money is subject to lawsuits and judgments like any other asset. 

If your beneficiary has credit issues, it’s imperative that you consult an estate planning attorney for more information.

Executors and Beneficiaries

Executors have a unique relationship with the beneficiaries of a will. The executor must make sure to manage the deceased person’s estate in accordance with probate rules in the state. 

Does an executor have to show accounting to beneficiaries? The executor must make sure that the beneficiaries receive the assets that the deceased person specified in their will. It’s also their job to provide accounting of distributions and assets for the beneficiaries and court.

The executor doesn’t have to be a financial or legal expert, but they do need to act with “fiduciary duty,” which means honesty and good faith.

What Else is an Executor Responsible for?

The executor of an estate has a number of obligations that will differ depending on how complex the financial circumstances of the deceased person are. Here are a few other duties that an executor is responsible for:

  • Finding and managing the deceased person’s assets: The executor must manage the assets until they’re distributed as intended to the inheritors. This can involve selling the deceased person’s real estate or securities.
  • Notify the necessary agencies about the deceased person’s passing: The decedent’s credit card companies and banks, along with the Social Security Administration, should be told about the death.
  • Find the inheritors of the property in question: If the person who passed left a will behind, it’s the executor’s job to read it and figure out who gets what. If they didn’t leave a will, the executor should look into local laws to figure out who the heirs of the estate are.
  • Pay ongoing bills and set up an account for incoming money: If the deceased person has incoming funds, the executor should set up a bank account for them. The executor should also look for bills, utilities, or mortgages that require payment during the probate process.

These are just a few of the executor’s duties, but there are others to be aware of. If you have any questions about your duties as the executor of a deceased person’s will, contact an estate planning attorney.

Even if you’re appointed the executor of a will, you aren’t obligated to accept the position. You may refuse the offer or quit during the process if it turns out you can’t complete the requested responsibilities. You’re also free to seek out legal help during this process, if you need it.

Estate Planning Assistance in Arizona

If you live in Arizona and are planning out your estate or you are the beneficiary to an estate in Arizona, JacksonWhite’s estate planning planning can help you. We have been helping Arizona handle a wide variety of estate planning services for over 30 years. Often times people are put in difficult situations after someone’s passing, where strategic asset and credit management is needed. With the help of an Arizona estate planning attorney even the most difficult situations can be made simple and fair.

Call our Arizona Estate Planning team at (480)467-4325 to discuss your case today.

Contact The JacksonWhite Estate Team

Call (480) 467-4325 or fill out the form below to schedule a consultation and discuss your best legal options.

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