When making an estate plan, it’s important to be aware that the transfer of assets can take some time. Just because you chose a specific beneficiary to inherit a certain amount of money does not mean that they take control immediately when you pass away. The estate executor has to inventory the assets, and then the estate has to go through probate while those assets are distributed.
If you want your beneficiaries to have access to this cash more quickly – perhaps so that they can use it for funeral arrangements or other necessary costs – then one option is to use a Payable On Death account. How does this type of account work?
Choosing a beneficiary
Similar to an estate plan, you pick a beneficiary with a Payable On Death account. This beneficiary then takes over control of the account in the event of your passing. For instance, if you have a savings account at the local bank, you can add a beneficiary designation to turn it into a POD account.
Often, all the beneficiary needs to do is provide proper documentation – like a death certificate – to the financial institution. The POD account does not have to go through probate. This means that the transfer can be much faster and may only take a few days. It also means that disputes are less likely since the account isn’t part of the estate plan in the traditional sense and cannot be challenged.
Setting up your plan
Payable On Death accounts are just one estate planning tool that you may want to consider. Take the time to carefully look into all of your legal options when making an estate plan for your family.
