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Torrance Estate Planning & Probate > Blog > Estate Planning > What Is A Payable On Death Account?

What Is A Payable On Death Account?


A payable on death (POD) account is an easy tool that, while it doesn’t solve every kind of estate planning need, can certainly make things easier when it comes to certain kinds of assets.

What is a Payable on Death Account?

A POD account (which is sometimes called a Totten trust, even though it isn’t technically a trust), is simply a bank account opened at a financial institution, where you sign a sheet of paper that tells the bank that when you pass, someone else will get the proceeds in the account. This sounds simple, and it is.

There are a number of benefits to using POD accounts. The first is ease. The bank has the forms, and they give them to you. There usually is no hidden language or anything to be particularly concerned about. You can open the account, and sign the paperwork there in the bank, all in one day.

You do have to open the POD with the bank, and use their paperwork and forms. You cannot simply amend a will, or file a document calling an existing bank account a POD account.

There is often no extra banking cost to open a POD, and there is no legal limit to how much money can be left in a POD account. The beneficiary doesn’t have to go through any complex legal process to collect the funds—usually, all the beneficiary must do is prove his or her ID, and proof of your passing to the bank.

Note that there is also what is known as a transfer on death account, which is usually used for assets like stocks, mutual funds, or investments.

No Probate Needed

Another big benefit of a POD account, is avoiding probate. By the terms of the agreement, when you pass, the account is automatically retitled to the named beneficiary’s name. That means that the assets in the account are never part of your estate, and thus, never need to be probated.

That benefit also can be a drawback—because those assets automatically go to whoever you designate in the POD account paperwork, it will override what you say in your will. That means that the terms of the POD need to be in line with what you say in your will or other estate documents. If there are life changes—remarriage divorce, founding a business, etc.—you will need to amend the POD separately from amending your estate documents.

Drawbacks or Limitations of a POD Account

Along this line, you can designate one, and only one beneficiary. If that beneficiary can’t take what is in the POD account when you pass (for example, if the named beneficiary were to predecease you), the POD assets would then become part of your estate, subject to probate, like any other asset. You can’t name a secondary beneficiary “just in case.”

Call the Torrance estate planning attorneys at Samuel Ford Law today to discuss your estate plan, and how and when it should be reviewed.



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