Transfer on death or payable on death accounts (TOD or POD accounts) are a common way to keep homes, bank and investment accounts out of probate court, avoiding the time and expense that the probate process entails. Are they right for you?
Let’s examine what TOD and POD accounts do and what they cannot do.
A payable on death designation can be set up for savings, checking, certificates of deposit, U.S. savings bonds, and investment accounts. Transfer on death accounts work to transfer homes in a similar way. Upon the death of the account holder, the funds or the asset pass directly to the named beneficiary. The pros and cons are the same for both TODs and PODs.
Setting up a transfer on death account is usually very simple. Typically, there’s a form you have to complete and sign to select your beneficiary or beneficiaries. Additionally, you can change beneficiaries whenever you like or name several beneficiaries, allowing them to split the money.
After the death of the TOD or POD account holder, the beneficiary can claim the asset in a fairly straightforward process. Often, the beneficiary will need only to show ID, provide a copy of the death certificate, and complete some forms.
TODs and PODs sound great at first glance - exactly because they are so easy to set up. However, there may be problems ahead for your beneficiaries if their circumstances change in any way. Before choosing a TOD or POD as the primary, or only tool for your estate, consider how best to protect your loved ones in the event of the unexpected:
Trusts provide all the benefits and peace of mind of a TOD or POD account without any of the downsides. Establishing a revocable living trust to hold your assets provides long-term asset protection for your beneficiaries against lawsuits, judgments, divorce, and bankruptcy courts. Like a TOD or POD account, a funded trust avoids probate costs and delays, and your personal information is kept private. Unlike a TOD or POD account, a trust can incorporate alternate beneficiaries and trustees should someone predecease you, or should you become unable to administer your own affairs.
Rather than pick tools out of a hat – or off of the internet – you first need clarity on the big picture. What are your goals and priorities? What challenges do you face now - or do you anticipate confronting? Whom do you want to protect? What kind of legacy do you hope to leave?
We recognize that every family is unique. We get to know our clients so we can work as a team to organize priorities and help you select appropriate planning tools for yourself and for your family.
Want to discuss transfer or payable on death accounts, living trusts, or just your future in general? To learn more about creating an estate plan specific to you and your family call us for a free initial consultation at
email me at firstname.lastname@example.org
or use our online calendar to schedule an appointment