Payable-on-death beneficiaries on bank accounts: how they work and how to add one

What a POD designation does

A payable-on-death (POD) account is an ordinary checking, savings or CD account with an instruction attached: when the owner dies, pay the remaining balance to the named beneficiaries. The FDIC calls these informal revocable trusts, often titled payable on death, Totten trust, in trust for or as trustee for accounts, created when the owner signs the deposit account agreement. Ally's deposit agreement lists the same aliases plus transfer on death.

The key word is revocable. While you are alive, the money is yours. Capital One says the beneficiaries have no interest in the account and cannot transact on it, and that you may add or remove beneficiaries or change the account type or ownership. Both banks say state law governs: Capital One says POD accounts are governed by applicable state laws, and Ally warns that your state may restrict these accounts and that it makes no guarantee a POD designation will comply with state law. How the designation interacts with your will or any estate process is a state-law question worth asking an attorney about if the amounts are large or the family situation is complicated.

Capital One and Ally rules side by side

The two banks' agreements differ on details that matter when you plan. Capital One allows only individuals as beneficiaries and pays then-living beneficiaries in equal shares; if a beneficiary is a minor, it pays that share to a statutory or court-appointed custodian. It also reserves the right to charge the account for amounts a deceased owner, co-owner or beneficiary owes the bank before distributing. Ally allows individual or joint POD accounts, pays beneficiaries after the last surviving joint owner dies, pays only beneficiaries living at that time, splits a predeceased beneficiary's share proportionally among the others and does not offer contingent beneficiaries. Ally's help pages add that beneficiaries are listed at the account level and cannot be attached to individual savings buckets.

How POD changes FDIC coverage

Standard FDIC insurance is $250,000 per depositor, per insured bank, for each account ownership category. A POD account moves money from the single-account category into the trust-account category, which has its own limit. Since April 1, 2024, the FDIC calculates trust coverage as number of owners x number of distinct beneficiaries x $250,000, not to exceed $1,250,000 per owner for all trust accounts at the same bank, including POD, revocable and irrevocable trusts.

Two conditions decide whether the beneficiaries count. For informal revocable trusts, the FDIC says beneficiaries must be named in the bank's deposit account records. And each beneficiary must be a living person, a charity or a non-profit that qualifies under IRS rules. Coverage changes at death, too. The FDIC generally insures a deceased owner's accounts as if the owner were alive for six months after death, but there is no grace period when a POD beneficiary dies: in the FDIC's example, a mother's $500,000 POD account naming two children drops from $500,000 to $250,000 of coverage immediately when one child dies.

How to add a beneficiary

Neither bank document we read gives a click-by-click path, so start with the account's settings or beneficiary section in the app or online banking, and call the bank if you cannot find it. Capital One's disclosures say you are solely responsible for meeting the requirements for establishing the account as POD, so confirm in writing or on screen that the designation took effect.

Have each beneficiary's full legal name ready, and decide the split before you start, because Capital One pays equal shares and Ally splits among survivors. After the change, check that the beneficiary appears on the account record; the FDIC counts only beneficiaries named in the bank's records.

Planning checklist

• List every account at each bank and its ownership category before adding beneficiaries; FDIC coverage is per bank, per category.
• Count distinct eligible beneficiaries per owner: five reach the $1,250,000 per-owner cap at one bank.
• Decide whether equal shares are acceptable; if not, separate accounts with different beneficiaries may be simpler than relying on one designation.
• Name a minor only after reading how the bank pays minors; Capital One pays a statutory or court-appointed custodian.
• Review designations after a birth, death, marriage or divorce; a beneficiary's death can reduce FDIC coverage immediately.
• Keep your will, any trust and your POD designations consistent, and ask an estate attorney how your state treats POD accounts if the balance is large.
• Tell beneficiaries the account exists and which bank holds it; a designation nobody knows about is easy to miss.

Who this fits and who should get advice first

A POD designation fits most people with straightforward wishes: a single owner who wants a spouse, adult child or charity to receive a savings or checking balance. It also helps someone whose balance at one bank exceeds $250,000 and who wants more FDIC coverage without moving money.

Get advice before relying on POD alone if you want unequal shares, need a contingent beneficiary at a bank that does not offer one, are naming a minor, have a blended family, or owe the bank money; Capital One says it may charge the account for amounts owed before paying beneficiaries.