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What is a Payable On Death account and should you use one?

On Behalf of | May 10, 2024 | Estate Planning

A Payable On Death (POD) account is one way that you can transfer assets to a beneficiary upon your passing. As such, it’s something that you may consider setting up while doing your estate planning.

But it is much different than a will or a trust. With a POD account, you add the beneficiary designation to an account that already exists. For example, you may put this designation on your savings account at your credit union or your local bank.

What happens is that the beneficiary provides proof of your passing to the institution, and they transfer ownership of the account into that beneficiary’s name. They take over the account for you and have access to the funds just as if it had been their own bank account all along.

Why is this beneficial?

You may want to use this type of designation if you’re concerned about your descendants having the money that they need for funeral costs and things of this nature. Payable On Death accounts can be accessed relatively quickly, whereas it can take months for assets to transfer through probate. The POD account, therefore, takes some financial pressure off of your family.

Another benefit is that disputes sometimes come up when beneficiaries do not agree with the will or other portions of the estate plan. But a POD account is outside of your estate, so no one can challenge this designation. You know that it is going to go through as intended.

Drafting your estate plan

These are just a few things to consider while creating an estate plan. Take the time to think through all of your legal options and what will be best for your family.