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Payable on Death (POD) Account

What is a payable-on-death (POD) account?

A POD is a type of account that is structured such that the account’s assets (typically certificates of deposit, checking, savings, or money market accounts) will transfer to the designated beneficiary or beneficiaries upon one’s death without having to pass through probate. 

Key takeaways 

  • POD accounts are excellent probate-avoidance vehicles for quickly and efficiently transferring funds to your loved ones upon death. 
  • While PODs are simpler and cheaper to set up as compared to inter vivos trusts, and incur little to no ongoing administration costs, the person who establishes a POD account has virtually no control over how the funds will be disbursed or for what purposes they may be used upon their death.  

Probate is a multi-step process whereby a probate court must validate one’s will, the decedent’s assets identified and appraised, their creditors notified, debts paid, and disputes regarding the estate or the will settled and resolved before any of the assets from the probate estate can be distributed to the beneficiaries. 

Since this process can be lengthy and drawn out, especially where many complex issues are involved, or multiple disputes arise, having some of your assets pass to your beneficiaries outside of probate can be essential to ensuring they have access to the funds they need until the probate process concludes. 

Advantages of using POD accounts over inter vivos trusts

As probate avoidance vehicles, living trusts have been used far longer than POD accounts, and they are much more flexible in terms of designating beneficiaries and controlling how assets are distributed upon one’s death. So why would one use a POD account instead? 

  1. POD accounts are simpler and cheaper to set up. 
  2. POD accounts do not incur the fees and costs of a trust’s management and administration. 
  3. While the specifics differ based on the type of trust and certain other factors, it is generally much more straightforward to change the beneficiaries of a POD account than those of a trust.
  4. Quicker transfer of assets to the beneficiaries upon one’s death. 

Note that even though inter vivos trusts do indeed pass outside of probate, because they can contain various types of assets from multiple sources and the specifics of how they should be disbursed with respect to each beneficiary are much more detailed, it takes much longer before the beneficiaries will start receiving funds from the trust. Conversely, POD accounts typically transfer to their beneficiaries soon after the financial institution gets a copy of the decedent’s death certificate and verifies the beneficiary’s identification.

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