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Home / Estate Planning / What Is a TOD or POD Account?

What Is a TOD or POD Account?

September 26, 2014 by Joe Masiuk, Estate Planning Attorney

What Is a TOD or POD Account?There are various different ways to get assets into the hands of your loved ones after you pass away. Some of the possibilities may sound like simple but effective solutions. However, when you dig beneath the surface, there may be some significant drawbacks. With this in mind, we will look at POD accounts in this post.

Payable on Death

The acronym POD stands for payable on death. Banks and most brokerages will provide a payable on death option. When you open a payable on death account, you name a beneficiary. The beneficiary would assume ownership of the assets in the account after you pass away.

These accounts are alternately called TOD or transfer on death accounts.

If you pass away in sole, direct possession of personal property, the property would become probate property at first. The assets would not be transferred to the heirs until the estate was probated and closed by the court.

Probate is the legal process of estate administration. This can be a very time-consuming process, and the time lag can cause difficulties for people who may have been relying on the decedent for support.

A big positive that comes along with a payable on death account is the avoidance of probate. The transfer of the assets to the account beneficiary would not be subject to the probate process.

Limitations

There are some potential negatives that go along with payable on death accounts. For one, you may be able to add multiple beneficiaries, but institution rules may compel you to allow for equal distributions. This may not be consistent with your wishes.

You do not have to conform to this structure. There are other estate planning devices that you can use to make sure that your true wishes are carried out to the letter.

Unintentional disinheritance is another potential problem. Some people name a single beneficiary, and they tell the beneficiary to distribute the assets to multiple different people. From a legal standpoint, there is nothing forcing the beneficiary to follow these verbal instructions.

If you were to create and fund a revocable living trust, the assets would be distributed to the beneficiaries in precise accordance with your wishes. These distributions would not be subject to the probate process.

Plus, you could name a disability trustee to administer the trust in the event of your incapacitation.

With a payable on death account, there is no way to account for the possibility of incapacitation late in your life.

Explore Your Options

You should be aware of all of your options when you are planning your estate. The estate planning documents that you use should facilitate the fruition of your wishes. There is no reason to bend to the limitations of a payable on death account.

If you would like to discuss things with a licensed professional, click this link to request a free consultation: Southampton PA Estate Planning Attorneys.

To learn more, please download our free probate in Pennsylvania report here.

 

 

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Joe Masiuk, Estate Planning Attorney
Joe Masiuk, Estate Planning Attorney
As a partner in the law firm of Flood & Masiuk, LLC, Joseph Masiuk is committed to, a practice which provides people of all ages and walks of life with thoughtful and comprehensive solutions in Estate Planning, which includes Elder Care, Medicaid and Special Needs Planning.
Joe Masiuk, Estate Planning Attorney
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Filed Under: Estate Planning

About Joe Masiuk, Estate Planning Attorney

As a partner in the law firm of Flood & Masiuk, LLC, Joseph Masiuk is committed to, a practice which provides people of all ages and walks of life with thoughtful and comprehensive solutions in Estate Planning, which includes Elder Care, Medicaid and Special Needs Planning.

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