One simple method for keeping a portion of your assets out of probate when you pass away is to establish a Pay on Death ( POD) account.
How it Works
When you establish a Pay on Death account, you’re the owner of the account during your lifetime, and you name a beneficiary (or more than one beneficiary) who will inherit the account upon your death. Because you’ve named a beneficiary for the account, it’s considered a non-probate asset, and it passes directly to your named beneficiary at the time of your death. All he or she has to do is take a certified copy of your death certificate to the bank, show identification, and fill out any of the bank’s required paperwork for transferring the account.
What to Watch Out For
While a POD account is a simple tool for avoiding probate, there are some things to consider before deciding to use this option.
First, the same feature that lets you avoid probate can also complicate your estate plan. Because a POD account is a non-probate asset, when you want to add or replace a beneficiary, you’ll need to do so directly with your bank. Each bank has a specific form for doing this, and failure to fill out your bank’s form means that you haven’t actually updated your beneficiary designation. And this is regardless of what your Will says.
Similarly, because your Will has no effect on your POD account, you’ll need to be very careful about naming account beneficiaries. For example, naming your daughter as beneficiary but forgetting to name your son will effectively disinherit your son, at least for purposes of your Pay on Death account.
If you’re considering using one or more Pay on Death accounts as part of your estate plan, you’ll want to meet with your estate planning attorney to make sure the accounts work with the rest of your plan to achieve your estate planning goals.