Payable Upon Death accounts (POD)

A payable upon deaths (PODs) account (or TOD account for brokerage assets) allows you to designate a beneficiary to receive the account funds upon your death. Under California Probate Code §5301, the beneficiary has no rights to the assets during your lifetime, and you can change the designation at any time.

While POD accounts are convenient, they present limitations:

• No Creditor Protection: The assets are not shielded from your creditors during your lifetime, nor from the beneficiary’s creditors upon transfer.
• Lack of Contingency Planning: If you name a single beneficiary and they predecease you or die simultaneously, the account defaults to probate.
• Tax Complexity: If you designate one child as the beneficiary with the verbal understanding that they will split the funds with siblings, the division is not legally binding. If they comply, the distribution will be treated as a taxable gift, potentially requiring a gift tax return (Form 709).
• Government Benefit Disqualification: Direct distributions to beneficiaries who receive needs-tested government assistance or college financial aid can disqualify them from benefits.