Estate planning is about far more than a will. Payable-on-death accounts make it easy to provide for your loved ones after your death and avoid probate. Read on to learn how these accounts work and how to make them work for you.
Playing keep-a-way with probate
Unless you die with very few assets your estate must face the probate process. In most cases, this means filing the will in the county probate court and then waiting the several months it takes for it to be complete. If you have beneficiaries in your will, they will have to wait for probate to be finished before they can have their inheritances. Payable-on-death accounts present a better way for some to handle their assets with no need for them to pass through probate court at all. This provides your beneficiaries with the funds as soon after death as the death certificate becomes available.
Start with your financial institution
Funds held by your bank, credit union, investment broker, and more are all eligible for payable-on-death (POD) designations. A separate POD must be executed for each account. Speak to your banker about having more than one POD to ensure FDIC coverage if your account exceeds the limits. Make sure you realize that these accounts may be known by several different names, but they mostly do the same thing:
More to know
1. These account designations can be used to provide for a single person or more. For example, you can have a TOD that gives the contents of your savings account to your four children. The TOD is only effective after your death and you can change the designations at any time.
2. TOD funds do not need to be probated, however, the designation cannot leave spouses or creditors without needed funds. Creditors and spouses who are shortchanged due to a POD can file a claim against a POD account if they can show good cause.
3. While beneficiaries can receive the funds in a POD account a lot quicker than waiting for probate, there may be a short waiting period in some states before the funds are paid.
4. If more than one designated beneficiary is present on the POD, the account balance is divided equally among all designated.
5. Some investment accounts require more time for the funds to become available than they might with a bank. You should also be aware of potential losses if you take money from a CD or another investment product that is not yet mature.
While an estate planning attorney from a place like Abom & Kutulakis LLP may not be needed to execute a POD, the advice you receive from this professional about this type of account designation might turn out to be valuable and you should still reach out to one.
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