What Is a POD Account?

Also called a “POD” account, a payable on death account can be created at a bank or credit union and is transferable without probate at your death to the person you name.  We frequently utilize these types of accounts as part of a larger, comprehensive estate plan.  So, I wanted to provide some information about what these accounts are and how to use them.

Sports Grind Entertainment’s recent article entitled “Payable on Death (POD) Accounts” explains that there are different reasons for including a payable on death account in your estate plan. You should know how they work and very critically, how it works with your greater estate plan, when deciding whether to create one. Talk to an experienced estate planning attorney who can help you coordinate your investment goals with your end-of-life wishes.

The difference between a traditional bank account and a POD account is that a POD account has a designated beneficiary. This person is someone you want to receive any assets held in the account when you die. A POD account is really any bank account that has a named beneficiary.

There are several benefits with POD accounts to transfer assets. Assets that are passed to someone else through a POD account are not subject to probate. This is an advantage if you want to make certain your beneficiary can access cash quickly after you die. Even if you have a will and a life insurance policy in place, those do not necessarily guarantee a quick payout to handle things like burial or funeral expenses or any outstanding debts that need to be paid. A POD account could help with these expenses.

Know that POD account beneficiaries cannot access any of the money in the account while you are alive. That could be an issue if you become incapacitated, and your loved ones need money to help pay for medical care. In that situation, having assets in a trust or a jointly owned bank account could be an advantage. You should also ask your estate planning attorney about a financial power of attorney, which would allow you to designate an agent to pay bills and the like in your place.

We often utilize POD account designations so that bank accounts can be transferred to a trust upon death.  This is provides for bank accounts to avoid probate on an account while still directing the assets to a trust which spells out your wishes for your assets.  This avoids the need to close and open new accounts in many situations.

One thing I would stress however, is that many people suggest POD accounts as a way to avoid probate so that an estate plan is not necessary.  Without elaborating, every case in which I’ve ever encountered this has been a disaster.  A POD account is not an estate plan substitute, it is a tool in the tool box.

Similarly, bankers often suggest these accounts to clients as a probate avoidance tool.  That has it’s merits of course, but what if you are using a will-based estate plan?  If so, adding beneficiaries actually removes these accounts from your estate plan, and often creates problems for the executor or beneficiaries.

If you are interested in creating a payable on death account, the first step is to review your estate plan and talk to your estate planning attorney about the effect such an account will have on your assets.

Reference: Sports Grind Entertainment (May 2, 2021) “Payable on Death (POD) Accounts”

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