Problems Using Joint and POD/ITF Bank Accounts to Avoid Probate

Joint and POD Accounts Avoid Probate But Can Cause Problems

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Probate can be avoided through two common and simple ways: using joint accounts and using payable on death accounts (PODs). These are also sometimes referred to as transfer on death accounts (TODs), in trust for accounts (ITFs), or Totten trusts. They all offer advantages, but they're not without some drawbacks.

Joint Accounts

The surviving owner or owners will simply continue to own the account when one account owner dies if it's owned jointly in the names of two or more people and it's designated as having "rights of survivorship." Probate won't be necessary with this type of account, and real property can also be held this way.

The surviving owners need only provide the bank or investment company with a death certificate for the deceased owner. The deceased owner's name can then be removed from the account.


A new deed can be created and recorded for the transfer of real property based on the death certificate.

It sounds simple enough, but several things can potentially go wrong.

Gift Taxes

The original owner might be deemed to have made a gift of a portion of the account to the new owners if the original account owner adds anyone who doesn't contribute any money into the account. The "gift" must be reported to the IRS on a gift tax return, Form 709, if the value exceeds the annual exclusion from gift taxes—$15,000 in 2021, increasing to $16,000 in 2022. The annual exclusion is per person per year.

Some states assess gift taxes at the state level on residents as well.

Potential Lawsuits

The funds in a joint account can be subject to a judgment lien if one of the owners is sued. This could wipe out some or possibly all of the account balance.

Disinheriting Other Beneficiaries

The original owner of the account will have effectively disinherited some of their children if they add one child to an account but omit others. And again, care should be taken to avoid any gift tax consequences if the surviving joint owner agrees to give the other children their proportionate share of the account.

Guardianship/Conservatorship Issues

A court-supervised guardianship or conservatorship would have to be established if the joint owner is a minor. This can be avoided by creating a revocable living trust which establishes a trust for the benefit of the minor after your death. You would then title the account in the name of your trust.

POD, TOD, and ITF Accounts

Many states will allow you to designate a beneficiary for your bank and investment accounts, or for individual stock certificates. You can name a payable on death beneficiary to these accounts during your lifetime, but the individual would have no access to or right to the funds while you're alive. The asset would transfer to them automatically at the time of your death.


These accounts are sometimes referred to as Totten Trusts.

U.S. savings bonds can also have payable-on-death beneficiaries. A handful of states recognize TOD or beneficiary deeds or enhanced life estate deeds for real estate as well. 

This also avoids probate because all the beneficiary must do to become the owner of the asset is show the bank or investment company a death certificate to access the account. As with joint accounts, however, there are several drawbacks to using POD, TOD, ITF, or Totten trust accounts and deeds.

The owner will have effectively disinherited all their other beneficiaries if they designate only one beneficiary but have others who they would like to inherit the property.

Problems could arise in figuring out what amounts the other designated beneficiaries should receive if a designated beneficiary predeceases the account owner or the real estate owner. The asset would become part of the owner's estate and would have to go through probate if only one beneficiary is designated, if they predeceased the account or real estate owner, and the owner fails to add a new beneficiary prior to their death.

Some financial institutions additionally require that beneficiaries must each receive an equal share of an account if more than one is designated on a POD, TOD, ITF, or Totten trust account. This might not be what you want, and it would force you to constantly keep an eye on account balances and property values to ensure that your beneficiaries receive their intended proportionate shares.

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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Bank of America. "Resources and Information to Help You Manage the Banking Relationship After a Loss," Pages 2-3.

  2. Internal Revenue Service. “IRS Provides Tax Inflation Adjustments for Tax Year 2022.”

  3. American Bar Association. "Estate, Gift, and GST Taxes."

  4. TreasuryDirect. "Death of a Savings Bond Owner."

  5. California Legislative Information. "Chapter 4. Protection of Financial Institution [5401 - 5407]."

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