Payable on death: the free form that skips probate

What it is

Banks call it payable on death, or POD. Brokerages call it transfer on death, or TOD. Retirement accounts and life insurance simply call it naming a beneficiary. The idea is the same in each case: you tell the institution who should receive the account, and when you die that person claims it with a death certificate and their ID.

While you are alive, nothing changes. The person you named has no access to the account and no right to it. You can change or remove them whenever you like.

The form does what a password cannot

Leaving your family the sign-in to your bank helps them see what is there. It does not make the money theirs. A bank pays a named beneficiary through its own claim process, with a death certificate, whoever holds the password. So for money, the form is the plan and the sign-in is only a convenience.

Why it matters

• It avoids probate for that account. Money with a named beneficiary generally passes outside the court process, so it can reach your family in weeks instead of months.
• It is usually free. It is a form, not a legal service.
• It is private. A will becomes a public record when it is filed with a court. A beneficiary form does not.

The catch: it beats your will

A beneficiary form generally wins over a will. If your will leaves everything to your children equally, but an old form on your savings account names only one of them, that one child gets the account. The same goes for a form that still names a former spouse.

So the forms need looking at whenever life changes: marriage, divorce, a birth, a death in the family. Checking them once a year is a good habit.

Things to get right

• Name a backup. A contingent beneficiary receives the account if your first choice dies before you.
• Be careful naming a child under 18. A minor usually cannot take the money directly, and a court may have to appoint someone to manage it. Ask the institution how it handles a beneficiary who is a minor, and whether you can name an adult custodian for them.
• Know that joint accounts are different. Adding someone as a joint owner gives them access today and may expose the account to their debts. A POD form does neither.
• Think about who pays the bills. If every account goes straight to beneficiaries, the estate may have no cash for the funeral, final bills or taxes. Your executor still has to settle those.

How to set it up

1. List your accounts: checking, savings, certificates of deposit, brokerage, retirement, life insurance.
2. For each one, ask the institution whether a beneficiary is on file, and who.
3. Ask for the POD, TOD or beneficiary form. Many banks let you do it online or at a branch in a few minutes.
4. Give the person's full legal name and date of birth, and name a backup.
5. Keep a copy of the confirmation with your papers.

Some states also allow a transfer on death registration for vehicles and a transfer on death deed for a home. Your state's motor vehicle office and county recorder can tell you whether those are available where you live.