Structuring Payable-on-Death Accounts with Your Estate Plan


Payable-on-death (POD) accounts can provide a quick, simple, and inexpensive way to transfer assets outside of probate. However, some account designations may conflict with plans you already have in place. Keep reading to know what to look for — and what to avoid — when structuring payable-on-death accounts with your estate plan

Setting Up POD Accounts

POD accounts can be used for bank accounts, certificates of deposit, and even brokerage accounts. Setting one up is as easy as providing the bank with a signed POD beneficiary designation form. When you die, your beneficiaries simply need to present a certified copy of the death certificate and their identification to the bank, and the money or securities will be theirs.

Beware of Potential Pitfalls

Be aware, however, that POD accounts can backfire if they’re not coordinated carefully with the rest of your estate plan. Too often, people designate an account as POD as an afterthought without considering whether it may conflict with their wills, trusts, or other estate planning documents.

Suppose, for example, that Shannon dies with a will that divides her property equally among her three children. She also has a $50,000 bank account that’s payable on death to her oldest child. The conflict between the will and POD designation may have to be resolved in court, which will delay distribution of her estate and generate substantial attorneys’ fees.

Another potential problem with POD accounts is that if you use them for most of your assets, the assets left in your estate may be insufficient to pay debts, taxes, or other expenses. Your executor would then have to initiate a proceeding to bring assets back into the estate.

POD accounts are often used to hold a modest amount of funds that are available immediately to your executor or other representative to pay funeral expenses, bills, and other pressing cash needs while your estate is being administered. Using these accounts for more substantial assets may lead to intrafamily disputes or costly litigation.

Rely on Your Advisor

Structuring payable-on-death accounts with your estate plan can be tricky if you’re unsure of what to look for. If you use POD accounts as part of your estate plan, be sure to review the rest of your plan carefully to avoid potential conflicts. Contact the trusted professionals at Ramsay & Associates with any questions you have regarding coordinating the use of POD accounts with your estate plan. We’re always here to help.

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About Brady Ramsay

Brady is the owner of Ramsay & Associates. He specializes in financial statement preparation and personal, fiduciary and corporate tax and accounting. His professional experience includes seven years' experience for local and national CPA firms before joining Ramsay & Associates in 2006. He has a Bachelor of Accounting degree from the University of Minnesota Duluth. He is a Certified Public Accountant, a member of the Minnesota Society of CPA's, an Eagle Scout, as well as an active volunteer in the community.

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