When you are planning your estate, you have a number of options that allow you to ensure your loved ones are cared for and financially secure. You might opt for a will or a trust, but there are other options that you should consider. One of these is establishing a payable on death directive that can be distributed upon your passing. According to The Balance, POD accounts are increasingly popular.
What do you need to know if you are considering establishing a POD? There are a few key facts that might affect your decision, but ultimately, you should seek out counsel from a legal representative to establish an estate plan as soon as possible. Learn whether a POD account is the right option for you.
You can avoid probate
One of the most appealing qualities of a POD account is that it typically allows beneficiaries to avoid probate. Without an estate plan, beneficiaries would have to go through the arduous process of accounting for and dividing your assets in court. A POD account allows this to be sidestepped, though if beneficiaries predecease the account owner, it may still be subject to probate.
Inheritance taxes may not apply
You might also be drawn to the fact that inheritance taxes may not be applicable to money gained through a POD account. The value at the time of death will generally not be subject to taxes, however, if it appreciates in value before or after the owner's death; any profit may need to be reported when the beneficiary files her or his income taxes.
Equal distribution may be difficult
Many people have multiple family members and loved ones that they intend to provide for with their estate. If you establish a POD account with multiple beneficiaries, however, it can be difficult to dictate exactly how the account's value is divided. This should be taken into account when you are considering different options for estate planning.