What Is A Payable On Death Account?

Accounts Payable on death (POD) account, often known as a transfer on death account, is a kind of banking account wherein a person may choose a beneficiary who immediately becomes the owner of the account when the account holder dies. POD accounts provide a simple means of making sure your assets flow to your loved ones without using the probative process.

How POD Accounts Work

Thus, POD accounts work in the same manner as personal chequing or saving accounts do during one’s lifetime. This particular account is fully owned and controlled by you – you can withdraw the money when you want. The only difference this time is that when you die, whatever balance there is in the account is released immediately to the POD beneficiaries.

The money that you have in the POD account of your choice does not have to go through probate, the legal process in which the decedent’s assets are divided after his or her death. It is paid out directly to the beneficiaries that you nominated when you opened the financial account. This enables the beneficiaries to receive the inheritance without much delay depending on the weeks after your demise. It also saves them expenses on lawyers since the property does not go through the probate procedure or process.

Designating POD Beneficiaries

Each time you open a POD account with a bank or in a credit union, you will be required to provide the name of at least one POD nominee in the account documentation. You can name more than one beneficiary in case you have many people whom you would wish to receive the cash, and you can state how much percentage of the amount you would like each of the beneficiaries to receive.

Your beneficiaries do not have to do anything or receive any notification when you add them to your will. They can only receive and spend the funds in question while you are still alive and capable of giving your consent. Their rights are just to the balance of the money at the end of the initial account holder’s lifetime.

Benefits of POD Accounts

POD accounts offer several advantages, including POD accounts offer several advantages, including:

- Avoiding probate – One significant advantage of POD accounts is the ability to transfer money immediately to beneficiaries at death. This helps to save time and the legal expenses that tend to be incurred during the probate process.

- Continued ability of the account owner to be in charge – The POD account owner has full authority and can still spend the money as they wish until their death.

- Convenience – POD accounts can be opened at all banks and credit unions to open an account all that is needed is a form.

- The pod accounts are a welcome addition to the estate planning tools which incorporate wills and trusts. They give the recipients quick access to ready cash.

- Privacy – Unlike wills and trusts where the assets are taken through court to be declared and thereafter become public property, POD beneficiary designations are still private.

Pod accounts can therefore be used in the estate planning process in the following ways.

To many, POD accounts are a part of the broad estate planning strategy that they implement. More often than not, they are employed concurrently with forms such as wills and living trusts. For instance, while you may name your home within a California living trust, you may continue to retain your bank accounts as POD transfers to avoid the living trust formalities.

POD accounts can also assist you in the distribution of TPDs such as jewelry, or heirloom furniture among others. Some individuals choose one POD beneficiary on a small POD account and leave the instructions in a note handwritten to that particular person as to their wishes with particular items.

As handy as POD accounts are, they should not be the only estate planning strategies that are used. You still require well-prepared wills and other legal papers for the segregation of other forms of assets such as land, companies, and shares. However, all in all, payable-on-death accounts offer a straightforward means of changing money and adding value to your estate.