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.