Estate Planning FAQs: Payable on Death (POD) Accounts
If you have a bank account, due consideration should be given to naming a beneficiary (or beneficiaries) through a Payable on Death (POD) or Transfer on Death (TOD) designation as part of a comprehensive estate plan. In this blog, we will address some of the most Frequently Asked Questions (FAQs) about this type of account.
What is POD/TOD?
A POD/TOD account operates the same as any other financial account, but includes directly named beneficiaries similar to the beneficiaries that you may have listed on a life insurance policy, 401K plan, etc. Upon the account holder’s death, those funds will pass to the POD/TOD beneficiaries directly and outside of probate.
How is a POD/TOD account different than a joint account?
Under a joint account, the account owners have shared and equal access and right to the account funds. Upon the death of one joint owner, the surviving owner will retain whatever remains in the former joint account. Alternatively, under a POD/TOD account, the named beneficiary does not have any right or authority to access the account funds until the account holder dies, which is otherwise referred to as a contingent interest in the account. Please note that a joint account can also be a POD/TOD with named beneficiaries who will receive those funds when the account holders pass.
Do I need an attorney to create a POD/TOD account?
You do not need an attorney to create a POD/TOD account. Much like opening a regular checking or savings account, a POD/TOD account is created through your preferred financial institution, who will also advise whether your current account can be modified to add a POD/TOD designation or if a new account will be required. With that said, consulting with an estate planning attorney is still recommended for purposes of understanding the legal implications and considerations associated with a POD/TOD account based on your specific circumstances.
What are some of the pros and cons of a POD/TOD account?
For many, the primary benefit of a POD/TOD account is the avoidance of probate for the designated bank account. In that regard, it is important to note that a POD/TOD account only addresses the passing of that specific account upon death and no other assets. As such, POD/TOD accounts are just a part of your overall comprehensive estate plan, which may also include a Last Will and Testament, General Durable Power of Attorney and Advance Health Care Directive. Further, POD/TOD accounts may be preferred for those that do not want to add a joint account holder who would have immediate access to his or her bank account funds. Third, as with opening any other type of bank account, there is no cost associated with establishing a POD/TOD account. Alternatively, some of these pros can also be cons. For example, the inability of the designated beneficiary to access the specified account until the account holder dies can become problematic if the account holder becomes incapacitated and is without a General Durable Power of Attorney. Further, a POD/TOD could be rendered ineffective if the designated beneficiary passes away before the account holder, as that account would then be subject to probate after all.
The skilled and knowledgeable attorneys at Lyons & Associates, P.C. have extensive estate planning experience in addressing all matters related to your estate plan. We invite you to contact us online or give us a call at our office at 908-575-9777 to schedule an appointment today. For your convenience we offer telephone consultations which allow you to speak with an experienced attorney about your estate planning needs from the comfort and security of your home.