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Payable-on-Death Account for Funeral Costs: How It Works and Where It Falls Short

A payable-on-death account, or POD account, is an ordinary checking, savings or CD account with a named beneficiary who can collect the money from the bank after you die, without going through probate. It can work well for funeral costs: you keep full control while you are alive, and the bank can pay your beneficiary once it has proof of death. The catch is that the beneficiary owns the money outright and does not have to spend it on your funeral, and the account holds only what you have saved.

Payable-on-Death Account vs. Funeral Trust at a Glance

Both set money aside for a funeral, but they work in opposite ways.

Feature	POD account	Funeral trust
Who controls the money	You, until you die	A trustee, under the agreement
Can you take it back?	Yes, at any time	Revocable: yes. Irrevocable: no
Who is paid at death	Your named beneficiary	The funeral provider
Must it pay for the funeral?	No, the beneficiary decides	Yes, that is its purpose
Funeral home involved?	No	Yes, named at signing or at death
Medicaid, while you live	Counted as your resource	Irrevocable: can be excluded
Growth	The account's interest, if any	Depends on how it is funded

Kentucky's Medicaid manual shows that Medicaid line in practice: it counts a payable-on-death account as a resource because the owner can revoke it and reach the funds, and it can exclude a prearranged funeral paid in cash under an irrevocable funeral trust agreement. Rules differ from state to state. Medicaid and Life Insurance: What Counts and What Does Not covers the wider picture, and Funeral Trusts Explained: Revocable, Irrevocable, and Who They Suit covers trusts in depth.

A final expense insurance policy is a third route. Instead of holding what you have saved, it pays the amount the policy states to the person you name, in return for premiums. The Final Expense Insurance vs Savings Calculator sets a premium beside the same money saved, and Final Expense Insurance vs. Prepaid Funeral Plans: Which Is Better? covers paying a funeral home in advance.

How a POD Account Works

You open a deposit account, or add a beneficiary to one you have, and sign the bank's beneficiary form. The FDIC calls these informal revocable trusts and lists the names you may hear for them: payable on death, Totten trust, in trust for, and as trustee for. They are created, it says, when the owner signs a deposit account agreement directing the bank to transfer the funds to named beneficiaries at death. Some banks say transfer on death instead; Texas law, for one, counts a T.O.D. account as a P.O.D. account.

Nothing changes for you while you are alive. State law sets the details, and the Texas Estates Code is a clear example. During the owner's lifetime, the account belongs to the owner and not to the beneficiary, and the bank may pay it to the owner on request. The owner can change the account by a signed written order that the bank receives while the owner is alive. At death, whatever remains belongs to the beneficiary, or to the beneficiaries who survive.

That transfer happens outside your will. Texas law says it takes effect under the account contract and is not a testamentary transfer, and the Texas State Law Library's glossary names payable-on-death accounts among the most common nonprobate, or nontestamentary, transfers: property that passes at death without being controlled by the will.

How Fast the Money Reaches Your Family

The beneficiary deals with the bank, not a court. Texas law, for example, lets the bank pay the named beneficiary on proof of death showing that the beneficiary outlived the owner, and a certified copy of the death certificate counts as proof of death. The request also has to meet the bank's own conditions for the account, so ask the bank now which documents and forms it will want.

Money in an account in your name alone, with no beneficiary, is what the Texas State Law Library calls probate property: assets that require some form of legal proceeding before they can pass to the heirs. California's court self-help site says that when property goes through probate court there, the fastest it typically happens is nine months. A POD beneficiary needs no court order first.

Is the Money Insured?

Yes, at an FDIC-insured bank. Under the rule in effect since April 1, 2024, the FDIC insures each owner's trust accounts, a category that includes POD accounts, up to $250,000 for each eligible beneficiary, with a maximum of $1,250,000 per owner per bank for five or more beneficiaries. That limit covers all of the owner's trust accounts at the same bank combined, however the money is split among the beneficiaries.

The beneficiaries must be named in the bank's deposit account records, though the account title no longer has to say POD or ITF. And to count, a beneficiary must be a living person, a charity or a nonprofit organization. Trust accounts are insured separately from accounts in your name alone, which have their own $250,000 limit per owner per bank.

Credit union accounts are insured by the NCUA instead. Its current rule insures each member-owner's revocable trust accounts up to $250,000 for each eligible beneficiary, subject to its limits and requirements. A simplified NCUA rule that covers POD accounts takes effect on December 1, 2026: $250,000 times the number of beneficiaries, up to $1,250,000 per owner per federally insured credit union.

Where a POD Account Falls Short

The beneficiary does not have to pay for the funeral

Under Texas law, for example, the money belongs to the beneficiary once you die, and nothing in the account ties it to your funeral. A beneficiary can pay the funeral home, or not. Choose someone you trust to do it, and put your wishes in writing.

A beneficiary who dies first

If one of two or more beneficiaries dies before you, Texas law gives the money to the ones who survive. If none survives, the bank may pay your personal representative or heirs instead, which puts the money back into the estate it was meant to skip. Check the beneficiary line whenever someone in the family dies.

It is still your money, and some debts can reach it

Because you can withdraw it at any time, the account counts as yours while you are alive, which is why Medicaid can count it. After death, money paid out of a POD account can be reclaimed for some bills. In Texas, if the rest of the estate cannot cover debts, taxes and administration expenses, including allowances for a surviving spouse and minor children, the beneficiary can be made to account to the estate's personal representative for up to the amount received, in a claim started within two years of the death.

Medicaid estate recovery is a separate question, and the Medicaid guide linked above covers the basics. The Social Security Act lets each state define the estate for recovery more broadly than probate, to include assets passed to a survivor through joint tenancy, survivorship, a living trust or "other arrangement." Ohio, for one, uses that wider definition. Whether your state applies it to a POD account is a question for its Medicaid agency.

It holds only what you put in

A POD account is savings with a name attached. If death comes before the balance covers the funeral, the family pays the difference. That gap is what a final expense policy is built for, since it pays the amount it states rather than the amount saved.

Setting One Up Well

• Name a beneficiary you trust to pay for the funeral, and consider a second in case the first dies before you; if both outlive you, both are entitled to the money.
• Check that every beneficiary appears in the bank's own records, and keep a copy of the signed form.
• Tell the beneficiary about the account, where the papers are and what you want. Funeral Planning Checklist: Planning Your Own Arrangements in Advance helps you write those wishes down.
• Match the balance to a real estimate, not a round number. The Funeral Cost Calculator: Itemize a Traditional Burial prices a funeral line by line.
• Make changes through the bank, not your will, and review the account after any death, marriage or divorce in the family.

More on this topic: What to Do When Someone Dies: A Checklist by Time · Final Expense Insurance When Terminally Ill: What Is Still Possible, and What Helps

Payable-on-death rules come from state law and each bank's account agreement, so they vary by state and by bank; the Texas, Kentucky and Ohio rules cited here are examples, not the rule everywhere. This is not legal, tax or Medicaid planning advice: ask your bank, and an attorney licensed in your state for anything involving Medicaid or an estate.

Sources

• FDIC: Your Insured Deposits
• NCUA: Share Insurance Coverage
• NCUA, MyCreditUnion.gov: Trust Rule Fact Sheet: Changes in NCUA Share Insurance Coverage
• Texas Legislature: Texas Estates Code, Chapter 113, Multiple-Party Accounts
• Texas State Law Library: Probate Law: General Information
• California Courts Self-Help Guide: Wills, estates, and advance care planning
• Kentucky Cabinet for Health and Family Services: Operations Manual, Volume IVA, Non-MAGI Medicaid (MS 1880, MS 1970, MS 2037)
• Social Security Administration: Social Security Act, Section 1917
• Ohio Administrative Code: Rule 5160:1-2-07, Medicaid: Estate Recovery
• CFPB: What happens if I have a joint bank account with someone who died?

Frequently Asked Questions

Is a Totten trust the same as a payable-on-death account?

For practical purposes, yes. The FDIC groups payable-on-death, Totten trust, in-trust-for and as-trustee-for accounts together as informal revocable trusts, created when the owner signs an agreement directing the bank to pay named beneficiaries at death. Some states define them separately, as Texas does with P.O.D. accounts and trust accounts, but under both Texas definitions the money belongs to the surviving beneficiaries when the owner dies.

Can I name more than one beneficiary on a POD account?

Yes. The FDIC says depositors can name as many beneficiaries as they wish, though its coverage stops growing at five beneficiaries, at $1,250,000 per owner per bank. If two or more beneficiaries outlive you, the money belongs to them together, and in Texas, for example, there is no right of survivorship between them unless the account terms provide for it.

Can I change a POD beneficiary in my will?

Do not count on it. In Texas, for example, the Estates Code says a POD payout takes effect under the account contract and is not a testamentary transfer, and an account is changed by a signed written order the bank receives while the owner is alive. To change a beneficiary, use the bank's own form and keep a copy.

Can a funeral home be named as the beneficiary of a POD account?

Ask your bank, because it depends on the bank's form and your state's law. For deposit insurance, the FDIC counts only a living person, a charity or a nonprofit organization as an eligible beneficiary, so a for-profit funeral home would not count toward that coverage. If you want money set aside for one particular funeral home, a preneed contract or funeral trust is designed for that.

Is a POD account the same as a joint account?

No. Texas law, for example, lets the bank pay a joint account to any owner on request while all are alive, but gives a POD beneficiary no right to the money until the owner dies. At death, the CFPB explains, a joint account held with rights of survivorship passes to the surviving owner, while one held as tenants in common sends the deceased owner's share to their heirs.