A payable-on-death (POD) account is one that you can set up at many financial institutions. When you do so, similar to buying a life insurance policy, you’ll be asked to name a beneficiary. You may also be able to name multiple beneficiaries. But you have to at least choose one so that the institution knows how to transfer your money.
After all, a POD account is one that immediately transfers into the other person’s name if you die. The beneficiary has no control over it before that. For instance, you may name your oldest child as your beneficiary. They can’t make any decisions about your money while you’re still alive, at least not in this capacity. But as soon as you pass away, that child becomes the owner of the bank account and they can do with it what they wish.
What are the benefits of doing this?
There are some benefits to setting things up this way, the first of which is that this can be stronger than simply leaving money to someone in a will or estate plan. A will sometimes leads to disputes between heirs, but a POD account leaves no room for any questions. The bank simply gives the money to the beneficiary as they were instructed.
Another benefit is that doing this can help to skip probate. The account transfers right away, so it’s no longer part of your estate. Your heirs may have to work to divide up other assets, but they don’t have to divide up that POD account. It has already been done for them, which can simplify the process.
These are merely a few of the advantages. They help to show why you need to consider all of your options when making an estate plan.