A POD account, or a payable-on-death account, is in many ways like any other financial account. You set it up at your bank, and it can hold funds that you can transfer in and out as you like.
The difference is that this account has a beneficiary designation. You are the account holder, but if you pass away, the beneficiary takes over. You get to choose the next account owner in advance, and they just have to show the financial institution that you have passed away.
1. A quick transfer
The first benefit is that this happens very quickly. It often takes months for someone’s estate to go through probate and for assets to be divided. It can take more than a year if there are conflicts or disputes. A POD account can give your beneficiary access to the funds in only a few days.
2. Avoiding probate
This means that the funds also avoid probate entirely. This can be beneficial because the transfer can’t be challenged. Even a will contest or a challenge to the rest of your estate plan doesn’t affect the POD account, as it exists outside of the will.
3. Leaving funds for a specific reason
Finally, many people use POD accounts to set aside money for certain purposes. Maybe they don’t want their direct descendants to feel the financial stress of funeral and burial costs. A POD account is one way to quickly give family members the money they need after you pass away, while still retaining full control until that day.
These accounts are just one estate planning tool you may want to consider. Carefully look into all of your legal options while drafting your plan.
