When clients come to me with concerns about probate, I often suggest looking into Pay-On-Death (POD) accounts. These accounts can be a simple and effective way to ensure that assets pass directly to the beneficiaries without the need for probate. But how reliable are they?
Understanding POD accounts
POD accounts allow the holder to name a beneficiary who will inherit the account upon the holder’s death. The beauty of these accounts lies in their simplicity. Upon the account holder’s death, the named beneficiary can claim the funds directly from the bank, bypassing the often lengthy and costly probate process.
Ease of setup and management
Setting up a POD account is straightforward. During my years of practice, I’ve seen clients successfully establish these accounts with just a few forms. Unlike other estate planning tools, there’s no need for a lawyer to set up a POD account, making it accessible to many people. This simplicity can save clients time and money, two things often in short supply during estate planning.
Limitations and considerations
However, while POD accounts offer many benefits, they aren’t without limitations. They cover only the assets held in the account. Clients with diverse assets, like real estate or business interests, will need additional planning tools. Furthermore, changes to beneficiaries require updating the account, which some people might overlook. I’ve had clients who forgot to update their beneficiaries, leading to unintended consequences.
Coordinating with broader estate plans
For clients with comprehensive estate plans, POD accounts should complement other strategies. They work best for transferring smaller, straightforward assets quickly. When combined with wills, trusts, and other estate planning tools, POD accounts can provide a balanced approach to managing and transferring assets.
By understanding their role and limitations, you can better incorporate POD accounts into your estate planning strategy.