A payable on death account, or POD account, gives you a chance to select the beneficiary for your bank account. Ordinarily, if you pass away with a traditional bank account, it then has to go through probate and be distributed in accordance with your will. But with a POD account, your beneficiary simply takes over and gets access to the account, which is now in their name.
The first benefit of this is that it means the account skips probate. People are sometimes looking for ways to keep their assets out of probate, and this is one tactic to do so. Planning in advance means that, while other assets may still have to go through probate, that specific bank account does not.
This speeds up the process
A related benefit is that this means the account may transfer into the new person’s name in just a few days. They can get paperwork to show that you actually have passed away, and the financial institution will give them quick access to the account as the new owner. They do not have to wait for weeks or months as the probate process plays out.
The designation can’t be disputed
This can also be a useful tactic for those who believe that their family members may get into disputes over how to divide assets. If something is written into a will or an estate plan, there is a chance that there could be a challenge from a beneficiary, such as someone who claims the plan was altered through undue influence. But since the POD account does not go through probate, it can’t be challenged, and so there is a smoother transfer of assets with no dispute.
Whether or not you choose to use a POD account is up to you, but be sure you understand all the estate planning tools at your disposal.
