Don’t you just hate it when people talk in acronyms that you don’t understand? You feel like, OMG, you’ve got me SMH and saying don’t use the ABBR —just say the word 4COL. Well, if you are talking to someone about your estate planning, you just might feel like that because trusts and estates law has many complicated concepts, and many acronyms to express them.
One of these is P.O.D.
What is a P.O.D?
P.O.D. stands for “payable on death.” It refers to a type of bank account that is frequently used as an alternative to a joint bank account. Instead of having a joint bank account, you can set up a bank account to be “payable on death” to someone whom you name. What this means is that upon your death, the account will pass directly to your named beneficiary. One of the advantages of this type of bank account is that it will avoid probate altogether.
Having a P.O.D. is not the same as having a joint account. With a joint account, the joint account holder has the right to deposit or withdraw money from the account both during your lifetime, and after your death. With a P.O.D., the beneficiary does not have those same rights. Instead, the beneficiary of a P.O.D. cannot do anything with the money or the account during your lifetime. He or she will only have access to the money after your death.
If you have more than one beneficiary, then at the time of your death the money will be divided between them, if they survive you. Also, you are not limited to naming human beings as your P.O.D. beneficiary. Often times it’s advantageous to name your revocable trust as your P.O.D. beneficiary.
A P.O.D. can be set up for checking accounts, savings accounts, money-market accounts and CDs.
Why Have a P.O.D.?
One of the chief objectives of any estate plan is efficiency. In large part this means avoiding probate to the extent possible. One reason you might want to consider having a P.O.D. is because it can help avoid tying your assets up in probate court after you die. Financial accounts with a P.O.D. designation pass directly to the designated beneficiary and do not go through probate.
What is Probate?
You may be wondering what probate is and why you want to try to avoid it. Probate is the court-supervised process of paying your debts and distributing your property to the people who inherit it after you die. It begins with the formality of admitting your will to the probate court and appointing a personal representative for your estate. Then notices are sent to all creditors and all claims against the estate (i.e., all debts) are paid. Probate ends with the final distribution of assets to the heirs.
The average probate process can take months or a year or more. Avoiding probate court proceedings after your death can save your family time, money, and headaches. One way of avoiding probate is by having both a P.O.D. account and a Durable Power of Attorney (“POA”). With these two tools in place, you can control your money, yet your loved ones will be able to assist you and pay your bills for you if you should become hospitalized or incapacitated. It also allows you to leave your money to whoever you want when you die. This approach is far better than, for example, naming one of your children as a joint owner on your bank account. When you name children as joint owners you subject your money to all of your child’s creditors and spouse in the event of a divorce. A P.O.D. designation is much preferred.
Developing the right estate plan that works for your unique situation takes careful thought and planning. Well-planned transfers allow your loved ones to start benefiting from your assets with minimal delay, while cost-efficient planning maximizes the assets available for inheritance.
Protecting Your Family is Just a Phone Call Away.
Don’t leave planning for your future and that of your loved ones to chance. All it takes is one phone call to SJF Law Group to ensure that your wishes will be followed and your loved ones taken care of when you are gone. We expertly guide individuals through the complex probate process, and capably handle all aspects of the creation, administration, and settlement of trusts as well. When you work with the estate planning attorneys at the SJF Law Group, you get more than just an estate plan: you get peace of mind. Call us at (954) 580-3690 or email us at: [email protected] today.