A payable-on-death (POD) account is something that you may want to consider as you create your estate plan. Essentially, you can use this paperwork to assign a beneficiary to one of your financial accounts. It then becomes a payable-on-death account because that beneficiary takes over as the account owner if you pass away.
There are some advantages to handling the transfer of financial assets this way, although you do have many options while making an estate plan. Let’s consider a few of the potential advantages below.
It avoids probate
First and foremost, a POD account doesn’t have to go through probate. The beneficiary just becomes the account holder. This can simplify the estate plan because it’s one asset that the estate executor won’t have to handle.
It can’t be challenged
As such, no one can challenge the beneficiary designation that you made. If you simply leave someone the contents of that financial account in your will, another beneficiary could theoretically challenge the will. But, since a POD account transfers into their name and skips probate, no one can challenge it, and this reduces the odds of an estate dispute.
It happens relatively quickly
Finally, the beneficiary may get control of the POD account in just a few days. The probate process, on the other hand, can take months. As such, a POD account is an effective way to quickly transfer financial assets to a specific person.
Even if you use a POD account, it is just one aspect of your estate plan. Be sure you know what steps to take when setting up all of the correct documentation.
