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Payable on Death Accounts
Often called a “poor person’s trust”, a payable on death account is simply a bank account accompanied with instructions to the bank to transfer the account to a specific person after the death of the account holder.
This can accomplish – for very little money, or for free – essentially the same thing as an expensive trust written up by a lawyer.
This also has the advantage of transferring money after death without going through probate – the (often lengthy) legal process by which a will is confirmed to be valid. When the account holder dies, the bank simply hands the money over to the named beneficiary.
Furthermore, it is fairly easy to change the beneficiary of a payable on death account at any time, for any reason. One simply needs to go to the bank and fill out the paperwork naming a new beneficiary.
Claiming the money from a payable on death account is fairly simple – the beneficiary simply shows up to the bank with a copy of the death certificate and proof of identity. It is usually no more complex than that.
This setup does have some disadvantages. Generally, it is impossible to name alternate beneficiaries in a payable on death account. Also, under most state laws, a person cannot disinherit a spouse. A payable on death account cannot be used to get around this by putting all financial assets in an account and making it payable to someone else. In most states, the spouse is legally entitled to a certain percentage of the other spouse’s estate.
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