Also called a “POD” account, a payable on death account can be created at a bank or credit union and is transferrable without probate at your death to the person you name.
Sports Grind Entertainment’s recent article entitled “Payable on Death (POD) Accounts” explains that there are different reasons for including a payable on death account in your estate plan. You should know how they work, when deciding whether to create one. Talk to an experienced estate planning attorney who can help you coordinate your investment goals with your end-of-life wishes.
The difference between a traditional bank account and a POD account is that a POD account has a designated beneficiary. This person is someone you want to receive any assets held in the account when you die. It is really any bank account that has a named beneficiary.
There are several benefits with POD accounts to transfer assets. Assets that are passed to someone else through a POD account are not subject to probate. This is an advantage if you want to make certain your beneficiary can access cash quickly after you die. Even if you have a will and a life insurance policy in place, those do not necessarily guarantee a quick payout to handle things like burial or funeral expenses or any outstanding debts that need to be paid. A POD account could help with these expenses.
Know that POD account beneficiaries cannot access any of the money in the account while you are alive. That could be an issue if you become incapacitated, and your loved ones need money to help pay for medical care. In that situation, having assets in a trust or a jointly owned bank account could be an advantage. You should also ask your estate planning attorney about a financial power of attorney, which would allow you to designate an agent to pay bills and the like in your place.
If you are interested in creating a payable on death account, the first step is to talk to your bank to see if it is possible to add a beneficiary designation to any existing accounts you have, or if you need to create a new account. Next, decide who you want to add as a beneficiary.
Reference: Sports Grind Entertainment (May 2, 2021) “Payable on Death (POD) Accounts”