When creating an estate plan, you may use a transfer-on-death arrangement to transfer mutual funds, stocks and things of this nature. But it only applies to investments. If you want to do a similar thing with a bank account, then you have to use a Payable on Death account.
When you do this, you choose a beneficiary to take over the account when you pass away. This means that the assets stay out of probate. What are some of the benefits of setting things up this way?
The transfer happens more quickly
First off, by skipping the probate process, you almost immediately transfer those assets to the beneficiary. Once the institution has received word that you passed away, the beneficiary becomes the account owner.
This can be very helpful on many levels, but especially if you anticipate your beneficiaries needing quick access to funds. Maybe you want them to use the money to cover the funeral costs so they don’t have to pay out of pocket, for example.
Disputes cannot happen
Additionally, when you assign an asset to someone in your will, there is always the chance that another beneficiary will start an estate dispute. Maybe they are concerned about manipulation, undue influence or a fraudulent will.
But with a POD account, since the money isn’t going through probate anyway, other beneficiaries cannot challenge it. This can help things go more smoothly if you anticipate disputes.
A POD account is just one estate planning tool to be aware of. Carefully consider all of your options while making your plan this year.
