Cut Out Probate Using A Payable On Death Designation
When it comes to making it easier on loved ones after your death, there are few estate planning moves easier than creating payable on death (POD) designations. This way of distributing assets to your beneficiaries puts your estate beyond the reach of the probate court so read on to learn more.
Probate Can Consume Your Estate
Unless you take action, your estate will be forced to undergo the probate process. Probate is a legal manner of ensuring that creditors are not left without the means to be paid what they are owed. That can mean that wills and estates have no other option but to pass through probate. What you must understand, however, is that just because probate is inevitable doesn't mean that all of your assets have to be tied up for months on end during probate. You can keep some of your property out of probate and payable on death designations is one easy and sure way to do so.
What is a Payable on Death Designation?
The designation of an alternate payee is added by visiting your financial institution and executing a single document. The document contains the names, addresses, and Social Security numbers of alternate payees that you want the account to go to in the event of your death. The contents of the account are distributed in equal shares to all named individuals. You can use a POD with checking accounts, money market accounts, savings accounts, certificates of deposits, stocks, bonds, and more. You can have as many POD designations as is needed. Additionally, POD designations are flexible and the owner of the account has full say over the designations with changes being made at any time. In some cases, these types of designations are known by other names such as:
- Tentative trust
- Transfer on death
- Informal trust
How POD Designations are Executed
Once an account holder has passed away, their financial accounts are frozen by the financial institution. These accounts remain frozen until an executor is appointed, the probate process is complete, or POD payees step forward with proof of death (whichever comes first). Upon presentation of the death certificate, the proceeds are disbursed to the designated individuals. You should take note that POD payees can be sued by creditors and spouses if they believe the designation was fraudulent, left them without financial means, or left financial obligations unpaid.
A POD is but one of many estate planning maneuvers promising to keep your property out of probate. Speak to an estate attorney, such as G Steven McKonly, PC, to learn more about this and other estate needs.