The Pros and Cons of Pay on Death Designations
Pay on death (POD) designations are a common way for individuals to pass on account assets to their beneficiaries. These designations come with a variety of benefits, including:
- Avoiding the cost and hassle associated with probate: Perhaps the single-biggest reason people choose to use POD accounts is to avoid the probate process when assets are transferred to beneficiaries. This transfer happens quickly and at little or no cost, especially when compared to standard probate proceedings.
- They may be changed or revoked at any time: The account holder continues to have full control over the assets in the account until his or her death, and the beneficiary does not have a right to the funds or control over them as long as the owner is still alive (even if the owner is incapacitated). If there are any changes the account holder wants to make, or if the account owner decides to remove the designation, he or she has total freedom to do so.
- Greater insurance protection: POD designations have an increased amount of money available through them according to Federal Deposit Insurance Corporation (FDIC) rules.
There are, however, a few downsides that anyone wishing to create a POD account should note. The most significant is what happens if you have a minor who you want to be a beneficiary. In general, POD beneficiaries should not be minors, as the cost for getting those funds for the minor could become significant. Financial institutions are typically reluctant to pass on these funds to minor children.
Additionally, one should not expect a POD account to operate in the same way as a trust. They are not meant to be a substitute for trusts, as the two accomplish different tasks. Your estate planning attorney will be able to provide you with more information on the differences between the two.
If you would like to learn more about creating a POD account, speak with a skilled Tampa estate planning lawyer at BaumannKangas Estate Law.