Nearly everyone has heard about avoiding probate. It turns out that while most people are not going to be able to plan their estates to escape probate in its entirety, much can be done to keep some assets out of its reach. One simple way to take back control of your estate for your beneficiaries is by using a payable-on-death (POD) designation on your accounts. To find out how it works, read below.
Why It's Smart to Avoid Probate
Probate leans on ancient laws regarding how debts are handled after death. Unfortunately, some of these antiquated laws seem to exist virtually untouched has time as gone on. Probate practices are different in each state, but almost all probate processes are time-consuming and expensive. If you can keep even one major asset out of probate, it can help smooth the way for your loved ones as they cope with their loss. A POD is a good way to do just that because anything with a POD designation avoids probate.
Here is how it works. In most cases, death calls for an instantaneous freezing of all bank and investment accounts. That means that loved ones, unless there is a surviving or joint owner on the account, have no access to the funds there. In many cases, money is needed to help pay bills and funeral expenses, but that money is frozen until probate makes its move. Having a POD eliminates all of that waiting, uncertainty, and inconvenience.
How POD Designations Work
As you make estate plans, consider the ease of creating a POD designation. Meet with your bank or investment fund manager and get things started by filling out a simple form that names the person (or people, as your POD can contain more than one beneficiary) that can take over the funds in the account after death. Multiple beneficiaries mean the fund balance will be evenly divided between all beneficiaries. In most cases, the beneficiaries named on the POD can gain access to the funds in the account as soon as the death certificate is released, which is usually a couple of weeks after the death. As the creator of the POD, you can change the plan by dropping it entirely or changing the beneficiaries. However, no changes may be made unless by you.
As you discuss this with your options with an estate lawyer, know that a POD can be known by other names such as transfer-on-death (TOD), etc. but they perform in the same basic manner. To find out more about this easy way to keep part of your assets away from probate, speak to an estate or wills lawyer.