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  • Home
  • About Us
    • Gratia Schoemakers
      • Community Outreach Program
    • Testimonials
  • Virtual Services
  • Estate Planning
    • Estate Planning Basics
    • Last Will and Testament
    • Revocable Living Trusts
    • Durable Power of Attorney
    • Medical Power of Attorney
    • Living Will
    • Family Estate Planning
    • LGBTQ Estate Planning & Asset Protection
    • Kids Safety Plan™
    • Business Succession Planning
    • Guardianship
      • Guardianship Planning
    • Special Needs Planning
    • Legacy Preservation Planning
    • Asset Protection
    • Trusts
    • Pet Trusts
    • Gun Trusts
  • Probate
    • Texas Probate Guide
    • Probate of a Will
    • Texas Affidavit of Heirship
    • Texas Small Estate Affidavit
    • Texas Heirship Determination
    • Texas Muniment of Title
    • Trust Administration
  • Family Law
    • Divorce
    • Collaborative Divorce
    • Mediation
    • Custody / Visitation
  • Blog
  • FAQs
    • FAQs – Videos
    • FAQs – Estate Planning
    • FAQs – Probate
  • Contact
    • Virtual Estate Planning Login
    • Client Portal

POD

Is a Payable on Death Account Right for You and Your Family?

Payable on death accounts, or “POD accounts” for short, have become popular for avoiding probate in the last decade or so.

What is a POD Account?

A POD account is a type of bank account authorized by state law which allows the account owner to designate one or more beneficiaries to receive the funds left in the account when the owner dies.

A POD account allows the owner to do what he or she pleases with the funds held in the account during the owner’s lifetime, including spending it all and changing the beneficiaries of the account.  After the owner dies, if anything is left in the POD account, the beneficiaries chosen by the owner will be able to withdraw the remaining funds without the need for probating the account by presenting an original death certificate of the owner.

What Can Go Wrong With a POD Account?

POD accounts sound great, don’t they?  In general, POD accounts are easy to set up and make sense for many people.  A handful of states now even recognize POD deeds for real estate and POD designations for automobiles.

Nonetheless, POD accounts may lead those who create them to believe that they have an “estate plan” and no additional steps will need to be taken.  This may or may not be true.  Below are a few examples of what can, and often does, go wrong with POD accounts:

  1. POD accounts can be set up as joint accounts that become payable on death after all of the owners die.  This means that if a husband and wife in a second marriage set up a POD account that will go to their six children from their first marriages after both die and the husband dies first, then the wife can simply change the POD beneficiaries to her own three children and disinherit the husband’s three children.
  2. Same facts as above, except that the wife remarries for a third time.  She could change the beneficiary of the POD account to her new husband, thereby disinheriting her children and her deceased husband’s children.
  3. If there is only one POD account owner and he or she becomes mentally incapacitated, then a valid power of attorney or court-supervised guardianship or conservatorship might be needed to access the POD account to help pay for care for a sick loved one.
  4. If a POD beneficiary is a minor under the age of 18 or 21 (this depends on state law), then a court-supervised guardianship or conservatorship may need to be established to manage the minor’s inheritance.
  5. If all of the named POD beneficiaries predecease the account owner, then the account may have to be probated.

These are just a few examples of why POD accounts should not be a primary asset transfer mechanism in your estate plan.  You need to have a will, a revocable living trust, a power of attorney, and a health care directive in place to insure that you and your property are protected in case you become mentally incapacitated and to make sure that your property goes where you want it to go after you die.

Year End Estate Planning Tip #2 – Check Your Beneficiary Designations

With the end of the year fast approaching, now is the time to fine tune your estate plan before you get caught up in the chaos of the holiday season.  One area of planning that many people overlook is their beneficiary designations.

Have You Checked Your Beneficiary Designations Lately?

Do you own any life insurance policies?  If so, have you named both primary and secondary beneficiaries for your policies?

How about retirement accounts – are any of your assets held in an IRA, 401(k), 403(b) or annuity?  Or how about a payable on death (“POD”) or a transfer on death (“TOD”) account?  If so, have you named both primary and secondary beneficiaries for these assets?

What about your vehicle – do you have it registered with a TOD beneficiary?  And your real estate – is it held under a TOD deed or beneficiary deed?

If you have gotten married or divorced, had any children or grandchildren, or any of the beneficiaries you have named have died or become incapacitated or seriously ill since you made beneficiary designations, it is time to review them all with your estate planning attorney.

Beneficiary Designations May Overrule Your Will or Trust Speaking of estate planning attorneys, has yours been given and reviewed all of your beneficiary designations?

It is critically important for your estate planning attorney to review your beneficiary designations as your life changes because your beneficiary designations may overrule or conflict with the plan you have established in your will or trust (unless your state law provides otherwise, but you should certainly not rely on this).  Also, naming your trust as a primary or secondary beneficiary can be tricky and should only be done in consultation with your estate planning attorney.

What Should You Do?

Whenever you experience a major life change (such as marriage or divorce, or a birth or death in the family) or a major financial change (such as receiving an inheritance or retiring) or are asked to make a beneficiary designation, your beneficiary designations should be reviewed by your estate planning attorney and, if necessary, updated or adjusted to insure that they conform with your estate planning goals.

If you have gone through any family or monetary changes recently and you’re not sure if you need to update your beneficiary designations, then consult with your estate planning attorney to ensure that all of your bases are covered. Call or contact us for an appointment. Our experienced attorney will be happy to strategize with you.

Will Your Revocable Living Trust Avoid Probate? It Depends.

If you’ve set up a Revocable Living Trust, congratulations!  You’re definitely on the right track. But… you’re only halfway there. Many believe because they took the time to create a Trust, their estate will automatically avoid probate.  Unfortunately, this is a false sense of security.

The key to probate avoidance is proper asset ownership, including the full funding of your Revocable Living Trust.

What are Probate Assets?

What assets require probate?

  • Accounts and real estate titled in your sole, individual name [without a payable on death (POD) or transfer on death (TOD) designation]
  • Accounts and real estate you own as a tenant in common
  • Contract assets naming your estate as beneficiary

What Assets Avoid Probate?

What assets automatically avoid probate after you die and, therefore, do not need to be funded (or cannot be funded) into your trust?

  • Accounts and real estate owned as joint tenants with rights of survivorship
  • Accounts and real estate owned as tenants by the entirety
  • Life insurance
  • Retirement accounts, including IRAs, 401(k)s, and annuities
  • Life estate property
  • Payable on death (POD) and transfer on death (TOD) accounts and, in some states, transfer on death or beneficiary deeds

What’s the Next Step?

Ask a qualified estate planning attorney to confirm that your Revocable Living Trust is fully funded and that all assets are aligned with your estate planning.  Proper asset ownership is key to probate avoidance.

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