Most people spend years building their savings. You work hard, contribute to retirement accounts, grow your emergency fund, and slowly create financial stability. But there’s one simple step many people overlook - making sure your money goes to the right person if something happens to you.
It’s easy to assume a will or life insurance policy covers everything. In reality, how your accounts are set up today matters just as much. That’s where Payable on Death designations and beneficiaries come into play. Understanding the difference and reviewing them regularly is one of the easiest financial moves you can make to protect the people you care about most.
In this article, we’ll identify the role of beneficiaries, explain how designations work, and highlight the importance of reviewing your accounts at least once per year.
What is a Beneficiary?
In simple terms, a beneficiary is the person (or people) who receives funds from an account when you pass away. Beneficiaries are commonly used on:
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Retirement accounts, such as IRAs and 401(k)s
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Life insurance policies
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Investment accounts
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Sometimes on deposit accounts
When you name a beneficiary, you can list one person or multiple people. You can also assign percentages. For example, you might designate 50% to your spouse and 25% to each child. Many accounts allow you to name:
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A “primary beneficiary” – the first person in line to receive funds
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A “contingent beneficiary” – a backup if the primary cannot receive the funds
An easy way to think about it is that a beneficiary is the “who” - the person receiving the money.
What is a Payable on Death (POD) Account?
A Payable on Death (POD) designation is a specific instruction added to a deposit account at a credit union or bank.
When you add a POD to an account, you’re directing where the funds should go upon your death. POD designations are primarily used for:
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Checking accounts
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Savings accounts
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Money market accounts
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Share Certificate accounts (Certificates of Deposit)
A few key features that make POD accounts incredibly important and practical are:
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Funds transfer directly to the named person (or people) after death
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The account typically avoids probate
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The beneficiary has no access to the account while you’re alive
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It’s extremely simple to set up with the credit union
Continuing with our example from beneficiaries:A POD is the “how” – it’s the method used on certain accounts to assign a beneficiary.
POD vs. Beneficiary: What’s the Difference?
This is the question where many people get confused because the terms sound similar, and in practice, they work closely together. In fact, it’s not uncommon for many financial institutions and their staff to use the two terms interchangeably because they are so similar.
An easy way to understand the differences:
Beneficiary
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A broad term used across many financial products
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Refers to the person who receives the funds
POD
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A specific type of beneficiary designation
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Used primarily for deposit accounts at credit unions and banks
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Instructs the financial institution on how to transfer the funds
Think of the beneficiary as the person and the POD as the manner you assign that person to the account.
For example, if you add your daughter as POD on your savings account, she is the beneficiary of that account. The POD is simply the document or instrument that legally makes it happen.
Why It Matters More Than You Think
When opening accounts at the credit union, many members will try to leave the POD section blank because they already have a will. But what surprises most people is that beneficiary and POD designations typically override what is written in a will.
If your retirement account lists one person as the beneficiary, but your will says something different, the account will follow the beneficiary form on file. The same applies to POD accounts.
Without updated designations, assets may have to go through probate – a legal process that distributes assets after someone passes away. Probate can take time, delay access to funds, and cause additional stress to loved ones during an already emotional period.
In short, having proper POD and beneficiary designations in place can:
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Provide faster access to funds
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Reduce legal complications
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Offer clarity during a difficult time
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Ensure your intentions are honored
This process isn’t about expecting the worst. It’s focused on making things easier for the people you care about most.
Who Can You Name as a Beneficiary?
Many people are surprised by how flexible beneficiary and POD designations can be. You can typically name:
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A spouse (if they are not on the account jointly)
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Children
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Other family members
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Friends
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Charities
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A trust or estate
You can also name multiple beneficiaries and assign specific percentages to each. If you do not specify percentages, funds are generally divided evenly.
NOTE: You cannot name an existing account owner, joint owner, or co-owner as a POD beneficiary because they already have ownership rights to the account. If you pass away and your spouse is a joint owner of your checking account, they can continue to access the account as usual.
Why You Should Review Beneficiaries Every Year
Setting up a beneficiary or POD designation once is not enough. Life changes, and your accounts should reflect those circumstances.
An annual review is a smart financial habit, especially after major life events, such as:
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Marriage
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Divorce
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Birth or adoption of a child
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Death in the family
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Significant financial changes
Here’s a real-world scenario to consider. Assume you named a sibling as your beneficiary years ago when you opened your account. Over time, you got married and had a daughter. If something were to happen to you, the funds would still go to that sibling – even if that is no longer your intention.
Or imagine a beneficiary passes away, and no contingent beneficiary is listed. In that case, the funds may default to your estate and potentially go through probate.
Outdated designations can, unfortunately, undo your intentions – even if they are detailed in your will.
NOTE: An ideal time to update your beneficiaries is during tax season because you’re actively pulling financial documents and tax forms to file with Uncle Sam.
How to Set Up or Update a POD or Beneficiary
Fortunately, the process isn’t complicated, and in most cases, setting up or updating a POD or beneficiary only takes a few minutes.
The easiest method is to stop by your local branch and complete the required forms. It’s a simple process, but it does require your signature. If a branch isn’t in your immediate area, call the credit union to begin the process by mail or via secure digital forms.
For beneficiary listings on retirement accounts and life insurance policies, you’ll need to contact those companies directly. Most can send you secure forms to sign electronically as well.
We’re Here to Help!
Financial planning isn’t only about growing your savings. It also involves directing those savings properly, should something unexpectedly happen to you. We understand that imagining these scenarios can be uncomfortable, but assigning or updating your POD designations or beneficiaries is one of the easiest and most impactful ways to care for your loved ones.
If you have questions about POD designations or beneficiary listings or want to update your account, we’re happy to help. Please stop by the Credit Union or call 410-687-5240 to schedule an appointment today.