Adding a POD Designation to a Joint Account

Here's an easy way to avoid probate for a joint bank account.

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POD accounts, which let you name someone to inherit the funds in a bank account at your death--without probate--can be very useful for couples who have joint bank accounts.

Accounts With a Right of Survivorship

Most joint bank accounts come with what's called the "right of survivorship," meaning that when one co-owner dies, the other will automatically be the sole owner of the account. So when the first owner dies, the funds in the account belong to the survivor—without probate. If you add a POD designation to this kind of joint account, it will take effect only when the second owner dies. Then, whatever is in the account will go to the PO. beneficiary you named.

EXAMPLE: Virginia and Percy keep a joint checking account with several thousand dollars in it. They hold this account as joint tenants with right of survivorship. They decide to name their sons, who are both adults, as POD beneficiaries. After both Virginia and Percy have died, the bank will release whatever is left in the account to the sons, in equal shares.

It's important for both spouses (or other co-owners) to realize that designating a POD beneficiary for a joint account doesn't lock in the surviving spouse after the other dies. The survivor is free to spend all the money, change the beneficiary, or close the account, shutting out the beneficiary who was named back when both spouses were still alive. Most couples want this flexibility for the survivor; after all, no one knows what the future will bring.

EXAMPLE: Howard and Marge name Elaine, Howard's daughter from a previous marriage, as the POD payee of their joint savings account. Howard dies first, and in the years that follow relations between Marge and Elaine deteriorate. Marge decides to remove Elaine as POD beneficiary and instead name her nephew, Max. When Marge dies, Elaine doesn't inherit any of the money in the account—even though she's firmly convinced that her father intended her to.

Adding a POD beneficiary to a joint account not only avoids probate, but allows you to plan for the unlikely event that both persons die simultaneously.

EXAMPLE: June and Horace have a joint savings account. They name their daughter, Virginia, as the payable-on-death beneficiary. When June and Horace are killed in an accident, Virginia inherits the money in the account without probate.

Accounts With No Right of Survivorship

Some kinds of joint accounts cannot be turned into payable-on-death accounts. Unless your joint account provides that when one owner dies, the other automatically becomes the sole owner, don't try to name a POD payee for the account. If you want to leave someone money, it's far more reliable and less confusing to establish a separate account and name a POD payee for it.

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