A payable-on-death (POD) account is sometimes referred to as a Totten trust. It is a way to pass financial assets to the next generation and may be something to consider as part of an estate plan.
A POD account is different from a traditional bank account because you name a beneficiary in advance. When you pass away, that beneficiary becomes the account holder. What are some advantages of using this approach, rather than including the funds in your estate plan or passing them to the same beneficiary through your will?
1. Probate avoidance
A POD account can be an effective way to keep assets out of probate. You may want to expedite the transfer process or avoid potential challenges and disputes from other beneficiaries. Even if someone has the ability to challenge your overall estate plan, a POD account skips probate entirely, which means that specific distribution generally cannot be challenged through the probate process. You know exactly where the money will go.
2. Quick transfers
Another benefit is that a POD account can transfer assets to the beneficiary much more quickly than going through the full estate administration process. This can be helpful if certain family members may need financial assistance immediately after your passing, such as to cover related expenses. By placing funds in a POD account, beneficiaries may be able to access that money sooner, even if it takes months for other assets to be distributed.
Not everyone needs a POD account, but it is important to understand your legal options when setting up an estate plan and considering your family’s needs.
