Before we discuss what happens to payable on death accounts following someone’s passing, let’s define what this process is. A payable on death (POD) account is an instrument that is designed by banks and credit unions. They provide a form for account holders to fill out in order to list beneficiaries who will receive funds upon their passing. These funds are transferred immediately when a death certificate and identification is provided by the beneficiary. These forms are typically filled out as part of the estate planning process.

Payable on death accounts are a popular means for preventing probate. How, exactly, does the payable on death process work?

The process is pretty straight-forward, and simple for the beneficiary to follow. They go to the bank or credit union where the account (or accounts) are held, and fill out some additional forms. At this point, a certified copy of your death certificate and valid identification must be provided. Once these simple steps are followed, the accounts immediately become the beneficiary’s.

This is not a perfect solution, though, and there are some considerations that must be addressed by the payable on death account benficiary:

• Payment of income taxes: Even though the beneficiary receives your pay on death account without incurring any associated fees, there are considerations one must address if this account is interest-bearing. All interest the account earns prior to your passing must be reported on your last income tax return. Following this return, the future interest earnings must be filed by the beneficiary.
•  Payment of estate taxes: Your estate planning attorney will alert you to estate taxes that may be owed following your passing. When creating a will, or a living trust, these instruments outline if the beneficiary of the payable on death account is required to use a portion of those funds to cover the estate tax bill. If you do not have wills and trusts, the state in which you reside will handle how these taxes are paid and by whom.

Estate planning and avoiding probate are two tricky processes, but essential overall. Adding payable upon death accounts not only ensures staying out of probate court, but it helps distribute your assets efficiently and without hassle. Confer with your estate planning lawyer about additional ways you can avoid probate, as well as additional ways to reduce estate taxes. Remember, creating a will does not guarantee you will not go into probate following your passing.

Robert J. Kulas, P.A. Attorneys at Law is a member of the American Academy of Estate Planning Attorneys.

Before we begin, let’s talk about what a pay on death account is (otherwise referred to as POD).  These don’t need to be just checking or savings accounts, mind you; they can also be retirement plans, stocks, bonds, securities and pensions. These designated accounts act as a probate avoidance tool.

It is simple to set up pay on death accounts. In most cases, all you have to do is fill out a form provided by where the accounts are held. Then, when you pass away, your beneficiary just has to present their identification and your death certificate in order to obtain what is designated to them.

Unlike some other forms of probate avoidance, POD accounts provide complete control of all assets in your name for the rest of your life, and you are able to make all deemed necessary changes to the beneficiary or beneficiaries. There are no spending limits on POD accounts attached to checking and savings bank account, and you are able to use funds as needed.

There are penalty restrictions for early withdrawals on accounts like IRAs, CDs and 401(k)s, as most of us may already know. However, this restriction is lifted for POD accounts. If you pass away prior to the designated time frame on said account, your designee does not have to pay the penalty for early withdrawal.

Another form of a pay on death account is life insurance. These benefits are paid in cash to the beneficiaries listed on the policy. Typically, these funds are used to pay debts you may still owe at the time of your passing, as well as handling dependent care. Keep in mind that there are several types of life insurance including universal, term and whole life policies.

Setting up pay on death accounts is an important step during the estate planning process. Confer with your estate planning attorney when creating a will, as well as creating a trust. All of these puzzles pieces fit neatly together when you have the proper legal guidance. However, if you attempt to work through this process on your own, it is possible mistakes will occur. During the process, request information about estate taxes and inheritance taxes in order to understand the entire picture and what everyone involved can expect.

Robert J. Kulas, P.A. Attorneys at Law is a member of the American Academy of Estate Planning Attorneys.

Any time you can set up your estate planning to avoid the probate process, you are helping your loved ones who are left behind avoid a long and often grueling process. Figuring out ways to avoid going through probate doesn’t have to be a complicated matter. In fact, one simple way to do this is by using something called pay on death bank accounts.

Even if you have large sums of money, using a pay on death account can be a great way to avoid the probate process. It involves a simple form provided by your bank where you can name the person that you want to get the money at the time of your passing. While you’re alive, the person who is listed as the beneficiary will have no access to the money. However, once you pass away, the money will automatically be transferred to them. All that they have to do is come to the bank, show proof of death and their identity, and they will be able to collect the money from the account.

If spouses own the account together, the money will automatically go to the surviving spouse first. Then, once the surviving spouse passes away the money will automatically go to the person listed as the beneficiary on the pay on death account.

As you can see, using the pay on death bank account approach can greatly alleviate the stress and strain of having to figure out what to do with your money in the estate planning process. However, pay on death may not work in every situation which is why you need to consult an experienced estate planning attorney to find out the proper steps for your own particular needs.

Robert J. Kulas, P.A. Attorneys at Law is a member of the American Academy of Estate Planning Attorneys.

A payable on death (POD) account can be a convenient way to pass on part of your estate outside of probate. With it, you designate a beneficiary who will inherit the account when you pass away. Because your beneficiary has been given the right, by contract, to become the owner of the account upon your death, there’s no need for a POD account to go through probate.

It sounds like a great solution for avoiding probate, but there are a few things you’ll want to think about:

• If you’re naming more than one beneficiary, check into your financial institution’s rules. Some banks and other institutions will only allow multiple beneficiaries to inherit in equal shares. So, if you want to leave one-third of an account to one child, and the remaining two-thirds to another, this could be a problem.
• You’ll need to be diligent about keeping track of beneficiaries. If you’ve named a beneficiary, and that person passes away before you do, you’ll need to update your beneficiary designation. If you don’t name a new beneficiary, the account will be subject to probate when you pass away.
• You can’t use your Will to change beneficiaries. Especially if you have more than one POD account, keeping up with beneficiary designations can require extra estate plan maintenance. Because payable on death accounts are non-probate assets, they’re not controlled by your will. So, if your will declares that you’ve changed beneficiaries for these accounts, the bank will ignore this part of your will. In order to effectively change beneficiaries, you’ll need to go directly to your financial institution and fill out the appropriate form.

Your attorney can help you determine how, or if, payable on death accounts should fit into your estate plan.

Robert J. Kulas, P.A. Attorneys at Law is a member of the American Academy of Estate Planning Attorneys.