Payable on death vs will

A payable-on-death designation beats your will. If the bank form says your daughter and the will says split it three ways, the daughter gets the account.

The Uniform Probate Code puts it in one sentence:

A right of survivorship arising from the express terms of the account, Section 6-212, or a POD designation, may not be altered by will.

That is the rule most people are looking for, and it is usually where the explanation stops. The useful part is what follows from it, because a beneficiary designation is a machine that keeps running exactly as last set, including when that is wrong.

The words, and what they cover

POD, payable on death, is a bank term. A checking, savings, or CD account with a named beneficiary. Sometimes labelled "in trust for" or a Totten trust; the same thing.

TOD, transfer on death, is the same idea for brokerage accounts and securities. The model statute says a TOD transfer "is effective by reason of the contract regarding the registration between the owner and the registering entity and this part and is not testamentary."

Beneficiary designations on life insurance, IRAs, and 401(k)s work the same way and are the largest such assets most people own.

TOD deeds do it for real estate, in states that allow them.

None of these are in your will. That is the point of them, and the source of the trouble.

Why the designation wins

A will governs your probate estate, what you owned outright with no other instruction attached. A POD account has an instruction attached. It never enters the estate, so the will never reaches it.

The code calls these transfers nontestamentary, and the drafters' comment explains why the label matters:

The purpose of classifying the transactions contemplated by this part as nontestamentary is to bolster the explicit statement that their validity as effective modes of transfers at death is not to be determined by the requirements for wills.

Rewriting your will changes nothing about these accounts. Neither does a codicil, a letter of instruction, or telling your family what you want. The only thing that changes a beneficiary designation is a new designation filed with that institution.

What POD does well

It is genuinely good at what it does, and the benefits are real.

Speed. The beneficiary brings a death certificate and identification. There is no court, no letters testamentary, no waiting for an executor to be appointed. Money can be available in days rather than months, which matters when someone is paying funeral costs out of pocket.

Cost. No probate filing fees, no executor's commission, no attorney time for that asset.

Privacy. Probate files are public records. A POD transfer is not.

Control while you are alive. The beneficiary has no rights at all until you die. You can spend the money, close the account, or change the name on the form. This is why POD is different from adding someone as a joint owner, a joint owner can clean out the account tomorrow, and the money is exposed to their divorce and their creditors. If the goal is "she gets it when I die," POD does that and joint ownership does something riskier.

Deposit insurance. Naming beneficiaries can increase FDIC coverage, with a firm ceiling discussed below.

For a straightforward situation, one account, one competent adult, no debts, no conflict, POD is an efficient tool and not a compromise.

The four ways it goes wrong

1. Nobody survives, and it lands back in probate

If the named beneficiary dies before you and no contingent is named, the code is blunt about where the money goes:

If no beneficiary survives, sums on deposit belong to the estate of the last surviving party.

The securities provision says the same for a TOD registration. The asset falls into the probate estate, the exact outcome the designation was meant to avoid, and is then distributed by the will, or by intestacy if there is none.

Name a contingent beneficiary. It is one line on the form.

Worth knowing about multiple beneficiaries too: the default is that surviving beneficiaries take "in equal and undivided shares, and there is no right of survivorship in the event of death of a beneficiary thereafter." If you want a deceased child's share to pass to that child's children, that is a "per stirpes" election, and it generally has to be made on the form if the institution offers it at all. Assuming it happens automatically is a common and consequential mistake, ask the institution directly.

2. Creditors can still reach it

"Avoids probate" gets heard as "safe from debts." Those are different claims.

The Uniform Probate Code has a provision making recipients of nonprobate transfers liable when the estate cannot cover what is owed:

a transferee of a nonprobate transfer is subject to liability to any probate estate of the decedent for allowed claims against decedent's probate estate and statutory allowances to the decedent's spouse and children to the extent the estate is insufficient to satisfy those claims and allowances. The liability of a nonprobate transferee may not exceed the value of nonprobate transfers received or controlled by that transferee.

The limits matter: it applies only if the probate estate is insufficient, it is capped at what the beneficiary received, it requires a written demand to the personal representative first, and a proceeding "must be commenced within one year after the decedent's death."

This is a uniform provision, not national law. States vary in whether and how they adopted it. But the honest summary is that POD avoids the probate process, not necessarily the debts, and a beneficiary who spends the money in month two may hear about it in month ten.

A surviving spouse's elective share is a separate carve-out. In states that have one, a POD designation does not defeat it.

3. Divorce does not fix an employer retirement plan

Most states have a statute that automatically revokes an ex-spouse's beneficiary designation when you divorce. It is a sensible safety net, and for employer retirement plans it does not work.

In Egelhoff v. Egelhoff (2001), a man named his wife on an employer life insurance policy and pension plan. They divorced. He died without changing the forms. Washington had exactly that revoke-on-divorce statute, and his children from a previous marriage relied on it. The Supreme Court held:

The state statute has a connection with ERISA plans and is therefore expressly pre-empted.

The reasoning was that federal law requires the plan administrator to pay "in accordance with the documents and instruments governing the plan." A state statute rewriting the beneficiary would force the administrator "to change the very terms he is supposed to follow."

Hillman v. Maretta (2013) closed the other door for a federal employees' group life policy. Virginia had a backup provision letting the intended recipient sue the ex-spouse to recover the money after the fact. The Court held that provision preempted as well.

The accurate version: for a 401(k), an employer pension, or employer-provided group life, the divorce does not remove the ex-spouse. The plan pays whoever is on the form. State revocation statutes generally do still work for non-ERISA assets like an IRA or a bank POD account, but relying on which bucket each asset falls into, years later, is a bad plan.

After a divorce, change every form. Then confirm in writing what each institution has on file.

4. Naming a minor creates the court case you were avoiding

A minor cannot give a valid receipt for money, so a bank or insurer will not simply hand over the funds. The money typically goes to a court-appointed guardian or conservator of the minor's estate, a court proceeding, with costs, possibly a bond, and ongoing accountings.

Then, at the age of majority, the entire remaining balance is handed to an 18-year-old outright. That is usually the real problem, not the paperwork.

Naming a minor directly on a POD form to avoid probate generally creates a guardianship instead. Where the sums are meaningful, the answer is usually a trust named as beneficiary, so a trustee controls the timing. The specifics, including whether a transfer to a custodian under your state's transfers-to-minors act is available, and at what age it ends, are state law, and worth asking a lawyer about rather than guessing on a form.

The FDIC ceiling people miss

POD beneficiaries increase deposit insurance, up to a hard limit. Under the current rule:

Trust deposits are insured in an amount up to the SMDIA multiplied by the total number of beneficiaries identified by each grantor, up to a maximum of 5 beneficiaries.

In the FDIC's consumer wording, each owner is insured "up to $250,000 per unique (different) eligible beneficiary," to a maximum of "$1,250,000 for five or more beneficiaries."

Two things follow. Naming a sixth or seventh beneficiary does not buy more coverage. And the rule changed on 1 April 2024, merging revocable and irrevocable trust accounts into one category with that five-beneficiary cap, so anyone who structured accounts before then on the assumption that coverage kept scaling may now be underinsured. If that describes you, it is worth a conversation with the bank this month.

Deposit insurance is also a separate question from probate and from creditors. Three different subjects that share a form.

Retirement accounts have a clock attached

For IRAs and 401(k)s, the designation controls who inherits. Federal tax law controls how fast they must take the money out.

Under the SECURE Act, most non-spouse beneficiaries inheriting from someone who died after 2019 must empty the account by the end of the tenth year following the year of death. Certain "eligible designated beneficiaries" are treated differently, a surviving spouse, a minor child of the owner, a disabled or chronically ill individual, and someone not more than ten years younger than the owner.

IRS final regulations issued in July 2024 settled a long-disputed point: if the owner died on or after their required beginning date, a non-eligible beneficiary must take annual distributions in years one through nine and empty the account by year ten. If the owner died before that date, no annual distributions are required, just empty it by year ten. Those final rules apply for required distributions beginning in 2025.

The planning consequence: naming a high-earning adult child as an IRA beneficiary can force a ten-year drawdown landing in their peak earning years. The form is free to fill in; the tax bill it creates is not. This is worth modelling with an advisor for any substantial retirement account.

Real estate is its own subject

A TOD deed (sometimes a beneficiary deed) lets a house pass outside probate. Many states allow some version, and the details vary enough to matter.

New York adopted one in 2024 with an unusual execution requirement, the deed "shall be signed by two witnesses who were present at the same time and who witnessed the signing," plus notarization, and it must be recorded before the owner's death. Miss the witnesses and the deed fails.

Florida has no TOD deed at all. The tool there is an enhanced life estate deed, commonly called a lady bird deed, which works differently.

Do not assume your state has one, and do not assume execution is casual. A TOD deed must usually be recorded while you are alive; a deed found in a drawer afterward generally does nothing.

What the will is still for

Everything with no beneficiary form attached: household goods, a car, personal property, a bank account nobody got around to updating, the account whose beneficiary died first. The will also names your executor and, critically, the guardian for minor children, which no beneficiary form does.

Most estates are a mix. The mistake is assuming the will is the master document and the forms are details. Functionally it is the reverse: the forms move first and the will collects what is left.

The twenty-minute review

Worth doing once a year, and immediately after any death, divorce, birth, or marriage in the family.

• List every account, policy, and retirement plan you hold.
• For each, ask the institution in writing who is currently named as primary and contingent beneficiary. Do not rely on memory or on what you filled in when you opened it.
• Confirm a contingent beneficiary exists on each one.
• Check that no minor is named directly.
• Check that no ex-spouse is named anywhere, and fix employer plans first.
• Confirm the names on the forms produce the same outcome your will describes. If they conflict, the forms win.

That last check is the one that catches the expensive surprises, and it costs nothing but an afternoon.

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The 72-Hour File has an inventory page for listing each account with its named beneficiary and the date you last confirmed it, so the conflict between the form and the will is found while you can still fix it. See what is inside