It's been said before that estate law is a lot more complex than most people think. One of the things that makes it more complicated is the probate process. Due to this, many people look for ways to avoid probate to ensure that their assets are distributed in a timely manner. One popular way to circumvent probate is to use a payable-on-death designation on bank accounts and certain assets. Learn about when this can be a good idea, and when it can be disadvantageous.
Keeping the Costs to a Minimum
Aside from being time consuming, probate can also be very expensive. This is especially true if there is any sort of litigation involved. A POD account avoids this hassle by allowing the bank to transfer the funds to a named individual upon the account holder's death. Fortunately, this can happen quickly and without the fees associated with probate. Cost efficiency should be an important part of your estate law planning.
Accounts with POD designations actually offer a lot of options. In general, these accounts can be modified or revoked at any given time. In addition, the account holder retains control over the funds until he or she passes away. Thus, POD accounts are a safe, flexible way to keep funds safe until the transfer occurs. This is another reason many people choose POD accounts as part of their end of life law plan.
There's No Limit!
Another attractive feature of POD designations is that you have the option of transferring any amount of money. This can be a big benefit if you have a large sum of money in your bank account. Using the POD designation will allow the beneficiary to claim this money in a quick, efficient manner. In most cases, the beneficiary will need to show identification and a certified death certificate to effectuate the transfer. Yet, this process will be a lot easier than dealing with the probate court!
One more thing to think about when dealing with a payable-on-death account concerns FDIC coverage. As you know, bank accounts are insured up to $250,000 by the FDIC. This coverage amount applies to all the funds you have at a particular institution. Therefore, if you need additional coverage, a POD account can help out. Since a new, POD account will have a beneficiary attached, you can take advantage of an additional $250,000 of FDIC coverage. This can be an important consideration for people with larger estates.
It's Not All Roses
Despite the many benefits of a POD account, there are some situations where they are not the best option. If you are designating a minor as the beneficiary, you need to think twice. There can be many complications when a minor attempts to claim the funds held in a POD account. Many times, a guardianship proceeding will have to occur first. This can increase the time and expense involved in effectuating the financial transfer. Hence, if you are thinking of leaving assets to a person who will not be 18 at the time of your passing, you may want to consider a trust instead. Speak to an estate lawyer to get the best recommendation for your personal situation.
For more assistance with estate law issues or probate hearings, get in touch with us at the Law Office of TR Spencer.