Estate planning allows you to identify the beneficiaries of your financial assets. The probate court process for dividing assets after death can be quite time-consuming, difficult and expensive. Assets that are encumbered with loans might be financially at-risk when someone dies if the money is not available to continue making payments. This is why some people add the POD designation to their bank accounts.
“Payable-On-Death Beneficiary after Your Death”
Debt levels are at all-time highs with outstanding balances accruing interest. Add automobiles and mortgages to the list. It can be a challenge to stay current on accounts. People know how much to pay on each debt. But what happens when they die? Will their heirs have the money to keep up with payments?
“Money Can Move Quickly”
Families can set up their bank accounts to ease any asset transfer upon the death of a member. You have many different options for setting up a bank account, including but not limited to the following: joint account, account for children or payable-on-death (POD) designation. The POD is your heir. The banking account immediately becomes his or her property when you pass.
While you are alive, you have full control over your banking account, even if it say POD on it. You would follow the legal payable-on-death procedure and write POD on your check with the heir’s name after it. You can add more than one name as POD or even charities as beneficiaries.
“Avoid Probate with Asset Designation”
The payable-on-death designation can reduce the number of things a family needs to worry about when someone dies. It also makes a banking account instantly accessible for paying off credit card bills or even funeral costs.
Families know that many senior citizens have very valuable assets, including bank accounts. The payable-on-death designation allows for the seamless transfer of wealth to the next generation.
Sometimes, probate can take up to a year with family members squabbling over the estate. In the meantime, bills can add up. The estate without the POD banking account might need to file for bankruptcy.
The FDIC has made the POD designation even more valuable by offering additional coverage for each POD named. If the FDIC insurance is $250,000 per banking account, then the POD account will have $250,000 + $250,000 = $500,000 instantly guaranteed.