What is a Payable On Death account? 

On Behalf of | Nov 4, 2024 | Estate Planning

There are numerous ways to pass financial assets on in an estate plan. You can put those assets into a trust and authorize distributions to a beneficiary. You can name the beneficiary in your will and leave them the assets directly when you pass away. You could even give gifts in advance, something that may help to 

reduce the odds of an estate dispute.

One other tactic to keep in mind is using a payable-on-death (POD) account. This means that you have completed the proper paperwork to add a beneficiary to the account. The transfer happens when you pass away, giving this account its name. The beneficiary just has to show the financial institution proof that you have passed, and then they become the owner of the account. In this sense, you pass all of the financial assets in that bank account to your selected beneficiary.

A POD account avoids probate

One reason to do this is because the POD account doesn’t have to go through probate or the rest of the estate distribution process. The beneficiary has already been named. The financial institution just gives that person control over the account.

One advantage is that the ownership transfer happens quickly. Your family may need access to funds, and they can get them from the POD account.

Another potential advantage is that other beneficiaries can’t challenge this designation. They may be able to challenge your will, making the probate process take longer. But the POD account is separate, so you know that the transfer will happen as intended.

As you can see, it’s quite important to understand all of the financial options you have when setting up your estate plan.