Estate Planning With Payable on Death Accounts

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Did you know that some bank and investment accounts allow you to specify a person that the account will be paid to at your death? Using a payable on death account allows the account holdings to quickly pass to your beneficiary without having to spend time in court. Settling an estate can take time, and your loved ones may need money to pay estate expenses as well as living costs.

You should be aware of how you set up your account. If there's more than one beneficiary you wish to leave account funds to, then making it payable to only one person will leave those other family members out of the money.  You can add other beneficiaries, but you should be certain to update your choices each time you review your estate plan.

What if your beneficiary passes away before you do? If you do not update the account recipient before your own death, then the account will face probate to determine which heirs are entitled to the funds and how much they will each receive.

If at any time you wish to move your payable on death account into your trust, you may need to seek the permission of the payable on death beneficiary. This may cause delays and additional costs in probate later if you forget this important step.

What about if you want to leave a different portion of your account to each beneficiary? Well, then this type of account may not be the best choice for your estate plan. Many pay on death accounts automatically give an equal share to each beneficiary.

You should also remember that at a pay on death account does not bear its share of estate taxes unless your estate planning documents say otherwise.  So, if you want the burden of estate taxes to be shared equally, you should discuss this with your estate planning attorney before setting up the account.

Although a pay on death account is a very simple way to avoid probate for your financial accounts, it can sometimes cause more of a headache if you are not aware of all of the hazards and do not plan accordingly.

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Source by Jack Alpern

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