The time and expense associated with processing your estate through probate is likely why you are exploring different options to pass your assets to anyone you want to inherit from you. To bypass probate, many people look for mechanisms to convey assets to heirs without going to court. A payable on death account is one of these methods.
When you set up a payable on death account, you name a beneficiary who will receive whatever assets remain in the account after you die. Kiplinger explains the different benefits and drawbacks associated with taking this option.
You remain in control
Some people think a payable on death account and a jointly owned account are pretty much the same. However, if you own an account with someone, the other owner can stop you from making decisions regarding the account. The other owner could also spend the account money as he or she wishes and potentially drain the account completely.
With a POD account, no one else has access to the account but you. You can preserve the assets in the account until your death. By then, whoever you have named as a beneficiary will receive the account’s contents. Additionally, depending on what state law says, you may be able to pass on other forms of property like a vehicle with a POD provision.
Wills do not govern a POD account
Be careful if you change your mind about who should be your beneficiary. Some people use their will to change who will inherit from a POD account, but a named beneficiary on a POD account will almost always trump whatever you say in a will. So you will need to change the beneficiary on the POD account itself. The good news is that if your will becomes the subject of a court battle, it will probably not affect what happens to your POD account.
Make other estate provisions
Be mindful of circumstances that could thwart your intentions for your POD assets. You may suffer incapacitation and lose access to your POD account. Creating a power of attorney may ensure that someone you trust will remain in control of your assets. Additionally, your POD beneficiary may die before you do. You might have to name a backup beneficiary to inherit from you.
These are just some examples of why estate planning should be comprehensive with various steps working together to realize your estate goals.