One of the major parts of estate planning is simply passing your assets onto your heirs and any other beneficiaries that you choose. Many of these assets are financial in nature. You may have investment accounts, bank accounts and much more.
One option that you have with some of these accounts is to turn them into payable-on-death accounts, often called POD accounts. What will this mean and how could it impact the rest of your estate planning?
An immediate change of ownership
The biggest thing to know about a POD account is that the change of ownership – from you to the beneficiary – happens as soon as they can show the bank that you have passed away. When you set everything up, you name a beneficiary to take over control of the account. Once you pass away, that account becomes theirs, and the rest of your family does not need to take any other steps. The estate administrator is not involved.
What this means is that the contents of that account don’t have to go through probate. Probate is the general distribution process for the assets that are in your will and the rest of your estate plan. For instance, your will may indicate that your other financial assets need to be divided equally between your heirs. But the value of the POD account does not count toward this division, because the entirety of that account belongs to the beneficiary that you already named.
There are many tools to use when doing your estate planning, so be sure you know about all the options you have.