There are a lot of options to consider when estate planning for passing on your assets to loved ones and other beneficiaries. A key goal of estate planning for most people is to get their assets into people’s hands in a timely and cost-effective way when they pass away.
One of the lesser-known options to accomplish this goal is a payable-on-death (POD) account, also known as a Totten trust. This type of account allows the holder to name a beneficiary who will inherit the account when they die. It has both advantages and disadvantages. Let’s look first at two advantages.
To skip probate
One of the principal reasons people choose POD accounts is to have those assets skip probate. The reason people do this is that probate gives creditors a chance to put in their claim to collect money owed to them, and probate can also delay the distribution of assets several months, or in some cases, years.
Flexibility
Another considerable benefit of POD accounts is that you can change your mind about them, unlike some trusts. If you decide you no longer want your money held this way, you can withdraw it and close the account.
Are there any disadvantages?
The main disadvantage of POD accounts, and perhaps the reason more people do not use them, is that you can only use them for cash assets. Another reason people decide against them is that the money in them may not get as good a rate of interest as could be found with other forms of investments.
Learning more about estate planning from an experienced legal professional can help you make suitable choices for yourself and your loved ones.