Let’s face it, probate can be a serious hassle. It can be a long and drawn out process, and it has the potential to get very expensive when you have a complex estate. Fortunately, there are a variety of tools available that may be able to help you keep certain assets out of probate, or potentially even allow your estate to skip probate entirely.
One of these useful tools is the “Payable-on-Death” (POD) designation for certain financial accounts.
Generally speaking, when you die the cash assets held in your bank accounts will normally be subject to probate before they can be passed on to your heirs. However, a POD designation allows you to streamline the process and prevent those assets from passing through probate.
Florida Statute 655.82 provides for the legal use of POD accounts. The way it works is, as the owner of a checking account, savings account, and even certain brokerage accounts, you can choose to name a designated beneficiary on the account—similar to how you name a beneficiary for life insurance. And as with life insurance or many other assets with beneficiary designations, the assets in your POD account will not pass through probate.
Instead, the funds in the account are, as the name indicates, payable to your designated beneficiary upon your death. You may also choose to name more than one POD beneficiary.
Keep in mind, this does not mean that the beneficiary you name will have any access to your accounts while you are alive. You will maintain sole control of your financial accounts during your life. Then, when you pass away, the beneficiary need only go to the bank to collect his or her inheritance.
It is usually quite simple to create a Payable-On-Death designation for most of your bank accounts. However, it is essential that you set up the POD in accordance with a broader estate planning strategy. POD accounts that contradict your will or other estate planning documents could cause severe complications and potentially lead to serious disharmony amongst your named heirs.
Additionally, if you do have unpaid debts, creating a POD account could prevent those funds from being used to pay your debts when you die, leading to unintended consequences such as your executor being forced to use other assets to pay your debts, like real estate that you may have intended to pass on to an heir.
It is essential that you consult with a skilled estate planning and probate attorney like those at Luis E. Barreto and Associates in order to coordinate your Payable-On-Death account plans with a thorough and effective estate planning strategy. Contact our offices today to get started!
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