Payable-on-death (POD) accounts can provide a quick, simple and inexpensive way to transfer assets outside of probate. They can be used for bank accounts, certificates of deposit and even brokerage accounts.
Setting one up is as easy as providing the bank with a signed POD beneficiary designation form. When you die, your beneficiaries just need to present a certified copy of the death certificate and their identification to the bank, and the money or securities will be theirs.
Beware of potential pitfalls
Be aware, however, that POD accounts can backfire if they’re not coordinated carefully with the rest of your estate plan. Too often, people designate an account as POD as an afterthought, without considering whether it may conflict with their wills, trusts or other estate planning documents.
Suppose, for example, that Shannon dies with a will that divides her property equally among her three children. She also has a $50,000 bank account that’s payable on death to her oldest child. The conflict between the will and POD designation may have to be resolved in court, which will delay distribution of her estate and generate substantial attorneys’ fees.
Another potential problem with POD accounts is that, if you use them for most of your assets, the assets left in your estate may be insufficient to pay debts, taxes or other expenses. Your executor would then have to initiate a proceeding to bring assets back into the estate.
POD accounts are often used to hold a modest amount of funds that are available immediately to your executor or other representative to pay funeral expenses, bills and other pressing cash needs while your estate is being administered. Using these accounts for more substantial assets may lead to intrafamily disputes or costly litigation.
Turn to your advisor
If you use POD accounts as part of your estate plan, be sure to review the rest of your plan carefully to avoid potential conflicts. We can help you coordinate the use of POD accounts with your estate plan.
SECURITIES AND ADVISORY DISCLOSURE:
Securities offered through Valmark Securities, Inc. Member FINRA, SIPC. Fee based planning offered through SDM Advisors, LLC. Third party money management offered through Valmark Advisers, Inc a SEC registered investment advisor. 130 Springside Drive, Suite 300, Akron, Ohio 44333-2431. 1-800-765-5201. SDM Advisors, LLC is a separate entity from Valmark Securities Inc. and Valmark Advisers, Inc. Form CRS Link
DISCLAIMER:
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. The services of an appropriate professional should be sought regarding your individual situation.
HYPOTHETICAL DISCLOSURE:
The examples given are hypothetical and for illustrative purposes only.
