Many clients are concerned with avoiding probate, whether it’s because of the expense or the time delays that probate causes. It is not very difficult to avoid probate, if you take just a few steps to make sure your property will pass on to your heirs without going through the courts. One of the easiest ways to accomplish this is by designating your beneficiaries for certain types of accounts. Using POD and TOD accounts in estate planning is simple.
Why should I avoid probate?
Many people try to avoid probate as much as possible because the process can be very time-consuming and, depending on the nature of your estate, the process can also be very complicated. The entire probate proceeding, from beginning to end, can take months or even years to conclude. Having a will can shorten that time because the administrator and heirs are identified in the will and the court will not have to make those determinations. Nevertheless, the process is still lengthy, as there are so many transactions that must be completed.
Definition of a POD Account
The acronym “POD” stands for “payable-on-death,” which means that the funds in the account are “payable on death” to the beneficiary named on the account. This simple tool is a very efficient method for avoiding the probate process. POD accounts typically include bank accounts. All that is needed to create these types of accounts is usually completing a simple form that identifies the individual(s) you want to inherit the funds in the account after your death.
How do POD accounts work?
With a POD Account, your named beneficiary will go to the bank where the account is held, and provide two things: identification and proof of your death. It is that simple. Your beneficiary can collect all of the funds that remain in the account, without any need for court involvement. A benefit of a POD account is that, while you are still alive, you always maintain complete control over the account. Your beneficiary will have no right to access the account until after your death.
Transfer-on-death, or TOD, properties are similar to POD accounts, in that the asset is given to your beneficiary automatically, upon your death. In some states, car owners have the option of naming a beneficiary on their certificate of registration. That person will then inherit the vehicle automatically upon your death. However, until that time, you remain free to sell or give away the car. You can also name someone else as the beneficiary, if you choose.
Also, some states, including Arkansas, allow individuals to prepare a “transfer-on-death” or “beneficiary” deed, which does not take effect until that person’s death. These types of deeds must be prepared, signed, notarized and recorded, like any other deed. The deed expressly indicates that it does not become effective until death. However, unlike a regular deed, you can revoke a transfer-on-death deed at any time.
TOD securities allow you to name an individual to inherit your securities, such as stocks and bonds, without the need for going through probate. When you purchase securities, you are required to register your ownership. When you register the stock, you can also request a beneficiary form. Like with POD accounts, the beneficiary will not have any rights to the stock as long are you are still alive.
If you have questions regarding TOD or POD accounts, or any other probate matters, please contact Wilcox Attorneys, PA online or by calling us at (479) 443-0062.
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