Payable on Death (POD)

Overview

Payable on Death (POD) is a legal arrangement that allows bank account holders to designate one or more beneficiaries to automatically receive the funds in their account upon their death, without going through probate. This simple yet powerful estate planning tool is sometimes referred to as a "transfer-on-death" (TOD) account or "totten trust."

Key Features and Benefits

Direct Transfer

• Funds transfer immediately upon death
• No probate court involvement required
• Beneficiaries need only present ID and death certificate
• Account owner maintains complete control during lifetime

Flexibility

• Multiple beneficiaries can be named
• Beneficiary designations can be changed at any time
• Can be applied to various accounts:
  • Savings accounts
  • Checking accounts
  • Certificates of deposit (CDs)
  • Money market accounts

How POD Accounts Work

During Account Owner's Lifetime

• Account owner maintains full control of the funds
• Can withdraw, deposit, or close account
• Beneficiaries have no rights to the money
• Can modify beneficiary designations

Upon Account Owner's Death

1. Account is frozen
2. Beneficiary presents death certificate
3. Funds transfer directly to beneficiary
4. Account closes automatically

Differences from Other Estate Planning Tools

POD vs. Joint Account

• POD beneficiaries have no access during owner's lifetime
• Joint account holders have immediate access

POD vs. Living Trust

• POD is simpler to set up
• Living trust offers more control and flexibility
• POD only covers specific accounts

Common FAQs

Q: Can I name multiple beneficiaries?
A: Yes, you can name multiple beneficiaries and specify the percentage each receives.

Q: Do beneficiaries pay taxes on POD accounts?
A: Beneficiaries may need to pay inheritance taxes, depending on state laws and relationship to the deceased.

Q: Can creditors claim POD funds?
A: Generally, creditors must make claims before the funds transfer to beneficiaries.

Setting Up a POD Account

1. Contact your financial institution
2. Complete POD designation form
3. Provide beneficiary information:
   • Full legal name
   • Social Security number
   • Date of birth
   • Contact information

Summary

Payable on Death accounts serve as an effective estate planning tool for simple asset transfers. They offer a straightforward way to avoid probate while maintaining control of funds during your lifetime. While POD accounts shouldn't be your only estate planning tool, they can be valuable components of a comprehensive estate plan.

Important Note: Always consult with a qualified estate planning attorney or financial advisor to determine if POD accounts align with your overall estate planning goals and circumstances.

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Related Terms

Here are some related terms that are relevant to the estate planning term "Payable on Death (POD)":

• Transfer on Death (TOD): A similar legal arrangement to POD, where a beneficiary is designated to receive assets upon the owner's death, avoiding probate.
• Joint Account: A bank account shared by two or more individuals, where each account holder has equal access and ownership rights.
• Living Trust: A legal document that allows an individual to transfer ownership of their assets to a trust, which can then be managed and distributed according to the trust's terms.
• Probate: The legal process of administering a deceased person's estate, including the distribution of assets and resolution of any outstanding debts.
• Beneficiary: The person or entity designated to receive the assets or funds from a POD account, life insurance policy, or other financial instrument upon the owner's death.
• Estate Planning: The process of arranging for the management and distribution of an individual's assets and liabilities in the event of their incapacity or death.
• Inheritance Tax: A tax levied on the transfer of assets from a deceased person to their beneficiaries, which may be applicable depending on the state and the relationship between the deceased and the beneficiary.
• Creditor: An individual or entity to whom a deceased person owed money, who may have a claim on the assets in a POD account before the funds are transferred to the designated beneficiary.