A Payable on Death (POD) account is just one tool that you can use when you’re trying to determine how to transfer your finances from your name to someone else’s. Many people accomplish this goal simply by naming their heirs in a will and stating how much money they want to leave to each person. But a POD account approaches things much differently. Embracing this approach can allow you to benefit from some unique advantages.
For one thing, you can set the POD account up as soon as you open a specialized account at your financial institution. You may also be able to take money from an existing account and add a beneficiary designation so that it is now a POD account. It’s important to get all the steps right, but this is not necessarily a complicated process to use and it is available to most people.
How it works
Once you’ve chosen a beneficiary, the account will transfer into their name if you pass away. They will then immediately assume ownership. They are listed on that account as the beneficiary even before you pass away, but they have no authority to take money out of that account or add more to it until you’re gone. Ownership does not change until it has been demonstrated that you have passed away and they are meant to be the next owner of that financial account.
As you may have noticed, this means that probate is not necessary for this asset. A POD account does not have to be listed in your will because you don’t have to name your heir and tell them that this part of your estate is intended for them. You will instead want to let them know that they are the beneficiary on the account but that they don’t necessarily have to address any other parts of your estate plan to take over that ownership.
Finally, because this account skips probate, it can reduce the odds of a dispute between your heirs. They can challenge a will for certain reasons but a beneficiary designation is usually fairly clear.
When it comes to estate planning, you can see how important it is to know about all of the legal tools you have at your disposal, as some may help you to reach your goals more efficiently and effectively than others.