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March 10, 2019May 23, 2019 by Tawnya Gilreath
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Are Payable-On-Death Accounts Right For You?

A payable-on-death account, also called a POD account, is a common way to keep bank and investment accounts out of probate, the court-supervised process that oversees distributing a deceased person’s property. Most people want to avoid their estate going through probate because their heirs will receive the inheritance faster, privately, and at lower cost.

Is a POD account an appropriate solution for your needs? Let’s examine what POD accounts do and how they fit into the overall picture.

POD Accounts: The Nuts and Bolts

A POD designation can be set up for savings, checking, certificates of deposit, U.S. savings bonds, and investment accounts. Upon the death of the account holder, the funds in the account pass directly to the named beneficiary.

Setting up a POD account is usually very easy. Typically, there’s a form you have to complete and sign to select your beneficiary or beneficiaries. Additionally, you can change beneficiaries whenever you like or name several beneficiaries (allowing them to split the money).

After the death of the POD account holder, the beneficiary can claim the money in a fairly simple process. Often, the beneficiary will need to show ID, provide a copy of the death certificate, and complete some forms provided by the financial institution.

Some Pros and Cons

So, POD sounds great because they are easy. But, there can be significant problems using this as the primary tool for passing along what you’ve worked to build.

What if a beneficiary predeceases you? If you do not name new ones before you die, then your estate is back to probate, thus negating the primary advantage of establishing the POD account in the first place!

What if the beneficiary is in the middle of a bankruptcy, divorce, or lawsuit? Because a POD account transfers the money to the beneficiary without any protection, your beneficiary may lose his or her entire inheritance simply because the death of the POD account owner occurred at the “wrong” time.

What if you are in a car crash and rendered legally incapacitated and unable to make decisions? The named beneficiary cannot access funds to provide for your needs. POD accounts only function at death. They provide no protection in the event of your incapacitation.

Trusts: A Comprehensive Solution

Here’s a comprehensive solution: establish a revocable living trust to hold your accounts. Just like a POD account, a funded trust avoids probate and is private. But, unlike a POD account, it can incorporate alternate beneficiaries, so your assets avoid court even if someone predeceases you. You can also provide long-term asset protection for your beneficiaries, protecting them against lawsuits, judgments, divorce, and bankruptcy courts. If you become incapacitated due to an accident or illness, the successor trustee can use the assets in your trust to pay for your care. Trusts provide all the benefits and peace of mind of a POD account without any of the downsides.

Remember: Estate Planning Tools are Context Dependent

Rather than pick tools out of a hat, you first need clarity on the big picture. What are your goals and priorities? What challenges do you face now—or do you anticipate confronting? Whom do you want to protect? What kind of legacy do you hope to leave?

Our team can organize your thinking and help you select appropriate planning tools from the arsenal. Want to discuss POD accounts, living trusts, or just your future in general? Please use our scheduling link to set up a private appointment.

The information above is general in nature and is not legal advice specific to your situation. If you have questions about your business, estate plan, or protecting your business or personal assets, you should speak with an attorney in your area for legal advice. If you live or do business in California and would like to speak with The Law Office of Tawnya Gilreath regarding your situation, please opens in a new windowschedule an appointment.

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asset protection, business owners, estate planning, individuals, probate, tax, trusts beneficiaries, business, estate planning tools, POD account, revocable living trusts

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The information and materials on this website (i) are general in nature, (ii) are provided for general informational purposes only, (iii) are not intended to be legal advice, and (iv) may not apply to specific factual or legal circumstances. Nothing on this website is intended to substitute for the advice of an attorney. Viewing the information on this website does not create an attorney-client relationship and no attorney-client relationship should be implied. While we attempt to provide high-quality information, laws change frequently and vary from one jurisdiction to another. If you require legal advice, please consult with a competent attorney licensed to practice in your jurisdiction.
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