A payable-on-death account, or a POD account, is a financial account that has a beneficiary. As such, it is often used as part of the estate planning process. If you are working on drafting your estate plan, you can choose a beneficiary for this account and add them to it in advance – turning it into a POD account.
You do not have to worry about giving up access to your own funds. The beneficiary does not gain control of your account as soon as you name them, and they cannot withdraw funds. Instead, once you pass away, they take over as the account holder. You still maintain full access as long as you need it.
Avoiding probate
One of the main benefits of doing this is that the account doesn’t have to go through probate. The transfer is much quicker and simpler. There are lower odds of an estate dispute. Since the financial institution already has the beneficiary designation, once they receive confirmation that you have passed away, they can quickly transfer ownership to the person that you have chosen.
Providing funds for your family
Another benefit of doing this is that you quickly provide access to funds for the rest of your family. For example, maybe the beneficiary is also the person that you have selected to handle your burial and funeral costs. They could use the money from the POD account to do so. They don’t have to wait for your entire estate to go through probate before they get access to those assets.
As you can see, it’s very important to know about all of the different options you have when making a comprehensive estate plan.