Law Library | Attorney Advertising | Financial Services | Affiliate Program | Blawg
Find the Right Lawyer Now:
Avoiding Probate with a Payable on Death Account
Among the ways to avoid the costs and inconveniences associated with probate include setting up a “payable on death” (POD) bank account. Despite a macabre name reminiscent of a bank account owned by mafia gangsters, these accounts are for everyone. These so-called “Totten trusts” can be opened at most banks, brokerage houses, credit unions, and other financial institutions.
Probate is the legal process whereby a public court determines that a will is valid and distributes assets to named beneficiaries. Depending on the state, probate can be very complicated and expensive, involving attorneys’ fees, court costs, appraisers’ fees, and executor’s fees.
Banks offering POD accounts provide a “beneficiary designation” form, on which the account owner can name anyone who will get the money in the event that the account owner dies. Since money passes automatically to the beneficiary upon the death of the owner, there is no need for the probate court to investigate to whom this money should go. Just make sure not to name a beneficiary who is a convicted murderer! (All joking aside, generally only spouses, children, grandchildren, parents, and siblings can be named as beneficiaries.)
There are several distinct advantages of a payable on death account over other probate-avoidance accounts such as jointly owned accounts and trusts. In a jointly owned account, a child’s creditors can get to the parent’s money, but a POD account remains the parent’s until death. In a POD account, beneficiaries can be changed or removed, or money spent, at any time.
Trusts are useful for avoiding probate fees but often involve CPA and attorney costs. With POD accounts, these costs can be avoided. However, POD accounts are still considered part of the estate for estate, inheritance, and gift tax purposes.
Consult a Lawyer - Present Your Case Now!
Find the Right Lawyer Now:
Did you find this article informative?
