A Payable On Death account, or a POD account, gives you a new option to transfer assets to others. You name a beneficiary on a bank account or another eligible financial account. When you pass away, the beneficiary provides the death certificate or notice to the financial institution and then immediately takes over control as the owner of that account.
But why would you use this type of account, rather than passing the contents of the bank account along in your estate plan? Here are a few potential advantages.
Skipping probate
First of all, many of your assets may need to go through the probate process. But Payable On Death accounts are not included. If you’re looking to reduce the percentage of your estate that goes through probate, POD beneficiary designations are one of the fastest ways to do it.
Quick access
For your beneficiary, one of the benefits is that they can quickly access the account. You may pass away and probate could take months. But a POD account may transfer in just a few days.
Avoiding disputes
Finally, a POD account may lower the odds that your beneficiaries will get into a dispute. After all, your biological children and other beneficiaries may have the option to challenge the estate plan. But since a POD account isn’t part of your estate plan and skips probate, they cannot challenge the beneficiary designation.
Setting up your plan
POD accounts are just one option you may want to consider when creating an estate plan. Carefully look into all of the options you have to set up a plan that is going to work best for your family in the future.
