Payable on death (POD) beneficiaries: Should they be part of your estate plans?

How does adding a payable on death (POD) beneficiary work?

Why choose to add a POD beneficiary?

One of the main appeals of a POD beneficiary is simplicity. Setting one up typically just involves filling out a form provided by your financial institution. Once it's in place, your chosen beneficiary can access the funds almost immediately after your death by presenting a death certificate and valid identification.

For people with modest estates or straightforward financial goals, adding a POD beneficiary offers an easy way to ensure loved ones have financial resources that they may need right away. They’re also a popular choice for those who want more privacy around their estate, since these transfers take place outside the public probate record.

Potential issues you need to consider

Simplicity and convenience aside, adding a POD beneficiary isn't the answer for every situation. Unlike trusts, this option doesn't allow for detailed conditions or oversight. For instance, if you want to control how and when money is distributed—such as limiting access for a young or financially inexperienced heir—a POD beneficiary alone may fall short.

Another common oversight is failing to update your beneficiary choices. A marriage, divorce or the death of the person you’ve named as beneficiary can result in confusion or unintended consequences. Unlike a will, which is often reviewed and revised periodically, people sometimes forget that POD designations may need to be occasionally reviewed as well.

This is particularly important because some financial institutions won’t give you the option to pick a backup beneficiary for your POD designation. If the person you've named dies before you, and you don’t update the account, those funds might end up going through probate after all.

Tax implications may play a role as well. You may want to discuss with your tax advisor whether adding a POD designation will present an unintended financial burden on your survivors and other beneficiaries of your estate.

How to set up and maintain a POD designation

1. Contact your bank and ask about their POD options; often a POD beneficiary can simply be added to your current account.
2. Be ready to supply basic information about the beneficiary you’ve chosen, such as their full name, date of birth and Social Security number.
3. Make sure the beneficiary knows about the account and where to find the necessary paperwork. Although they won’t have access to it while you’re alive, having clear instructions can prevent misunderstandings when the time comes.
4. Don’t forget to periodically update this information, especially after major life events.

Associated Bank can help you make sure POD designations are part of your estate plans

At Associated Bank, we have extensive experience in estate administration services and make sure our clients understand and adopt strategies that go beyond simple transfers. While adding a POD beneficiary can be useful, it's most effective when integrated into a broader estate plan, including wills and potentially trusts.

Because we recognize that comprehensive estate planning needs to include clear beneficiary designations, we encourage our clients to ensure that all their banking and retirement accounts are kept up to date. We’ll contact you if you need to complete specific paperwork to make sure that an eligible account is designated as payable on death.

Final thoughts

Thinking and talking about final financial arrangements might be uncomfortable, but taking time to understand options like POD designations—and revisiting them regularly—can make all the difference in ensuring your wishes are carried out smoothly. Naming a POD beneficiary is simple and can provide peace of mind in what can be a difficult time. Like any estate planning tool, it’s an essential part of a well-thought-out strategy for your legacy.