How Does a Payable-on-Death Account Work?

At the time of your unfortunate passing, you might imagine just how distraught and overwhelmed your loved ones may become. With this in mind, in an attempt to lighten the burdens they may be left to deal with, you may want to transfer your assets to them as simply and seamlessly as possible. Through word-of-mouth and your personal research on estate planning, you may have heard good things about what is known as a payable-on-death account. Well, please read on to discover how a payable-on-death account works and how one of the seasoned Butler County asset protection attorneys at Heritage Elder Law & Estate Planning, LLC, can help you determine whether this is a strategic implementation for your estate plan.

What is a payable-on-death account, and how does it work?

By its simplest definition, a payable-on-death account is a standard bank or credit union account with a named beneficiary added. As the name suggests, the assets you save in this account are distributed immediately and directly to your beneficiary or beneficiaries at your time of death. The key to this account is that you keep full control over it during your lifetime, and your beneficiary has no rights to it until after you pass away. With all that being said, the financial institution you choose to hold your payable-on-death account may have specific forms they require for the beneficiary designation to be considered valid. Rest assured, your hired attorney can go over these documents and ensure you have filled out all of them entirely and accurately.

Is a payable-on-death account better than a will or trust?

There is no definitive answer for whether having a payable-on-death account is “better” than setting up a Last Will and Testament document or a living trust. That is, it may depend on personal preference and also the primary goals you wish to accomplish through your estate plan. For example, a payable-on-death account may be favorable if you carry significant cash assets that you want to easily transfer to your named beneficiary or beneficiaries with no strings attached and no need for a probate court’s involvement.

A trust may be similar in that it evades probate. However, it involves a trustee whom you appoint to manage and distribute the trust’s assets in a manner and at the time you direct in this legal document. Having this responsible party around may be beneficial if your intended beneficiary is not yet of adult age or has yet to exhibit a reputation for making financially sound decisions. Last but not least, you should never use a payable-on-death account to completely replace a will, as your estate plan still needs a comprehensive legal document for distributing all your accumulated assets, not just the ones saved in this bank or credit union account.

For further legal assistance, please hire one of the competent Butler County elder law attorneys from Heritage Elder Law & Estate Planning, LLC. Schedule your initial consultation with us today, and see just how much we can do for you.