If you have a bank account, you can name a beneficiary in advance. Once you make this beneficiary designation, you have turned your account into a payable-on-death account. When you pass away, the beneficiary assumes control.
This is often an important part of estate planning for those who are trying to divide substantial assets. It’s far from the only option. You can also leave money to someone directly in a will, for example, or you can put money into a trust so that they get it under the direction of that trust. What are some reasons why you would use a payable-on-death account?
Avoiding probate
To begin with, many people do this if they want to keep assets out of probate. Perhaps you are concerned that another beneficiary will dispute the estate plan. They cannot dispute the beneficiary designation for a payable-on-death account, as it doesn’t pass through probate, so this ensures that the money goes where you want it to go.
You keep control
Another benefit of a payable-on-death account is that you still have control of that account as long as you are alive. The beneficiary doesn’t get to take over early or remove money from the account. If you want control over your financial assets, this is a way to do it.
Quick access to cash
Finally, you may be concerned that your family will need quick access to funds after you pass away. Probate could take months, so that’s not as helpful. With a payable-on-death account, the beneficiary generally gets access to the funds almost immediately.
Financial accounts are just one part of creating an effective estate plan. Carefully consider all of your options as you go through the process.