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Estate Planning

Understanding Payable on Death Account Pros and Cons

Payable on death (POD) or transfer on death (TOD) is a rule that was enacted in the late 80s with help from the National Conference of Commissioners on Uniform State Laws. Florida is one of the states that has adopted these rules which were recommended but optional. In fact, one of the co-signors to the original bill was the AARP who believed it allowed more control over assets, which in fact it does. However, before using these accounts, it is important to understand payable on death account pros and cons.

First the Upside

Setting up a TOD account allows you to transfer assets directly to a beneficiary without the need for them to be handled through probate. This means your beneficiary would have immediate access to the funds or assets by simply providing a written request along with a certified death certificate. POD accounts may be set up, at the discretion of the financial institution to include bank accounts or brokerage accounts. Individual banks or brokerage may refuse to set up these types of accounts but most will do so. Some of the other benefits include:

  • Accounts are easy to set up
  • Funds are easy for beneficiaries to access
  • There is no limit on the dollar amount in accounts

Not All Upside

There are cons to a POD account which must be carefully evaluated when you are doing your estate planning. First, you can only set up one beneficiary on the account. In the event the beneficiary dies before you do, the account would automatically be placed in probate. Additionally, should you wish to grant the beneficiary access to the funds prior to your death, you would have to make the request to close the account. Unfortunately, this can cause time delays.

Payable on death accounts may not be the right tool to use when estate planning even though it may help your survivors avoid a long, often costly probate process. If you are trying to plan your estate to ensure your survivors are able to gain access to your assets as quickly as possible, contact the Law Offices of James C. Shields for help. We will work with you to find a financial plan that works for your needs.