What Is "Property Payable on Death"?

You can name a payable-on-death account beneficiary without giving up your ownership rights.

You can name a payable-on-death account beneficiary without giving up your ownership rights.

You can reduce your taxable estate by having your property pass outside of probate. A payable-on-death account, which is also known as a transfer-on-death account or a Totten trust, is one way you can do this. Assets in a POD will pass directly to the named beneficiary upon your death. For state taxation purposes, POD property is not included in your estate.

POD Property

You can designate a beneficiary or more for property you hold in your name. The beneficiary can be an individual or an institution, such a charity or a hospital. The property account or title changes to include the POD beneficiary’s name. You can revoke the POD designation or name another beneficiary at any time. The beneficiary does not have access to the property and is not entitled to receive information about the property such as bank or brokerage statements. You retain full ownership and control over the property until your death.

POD and Unified Credit

Under the IRS tax code, your gross estate includes everything you own or partially own when you die. For this reason, POD assets are included in your federal gross estate for determining an estate’s tax liability. Offsetting the federal estate tax is the unified gift and estate tax credit. For individuals who died in 2012, the unified credit is $5.12 million. As long as your estate is valued at $5.12 million or less, your estate will not have a federal tax liability.

POD Bank Accounts

No matter how much money you have in your checking or savings account, the POD designation keeps your money out of probate. Your bank can provide you with the POD form and re-title your account to reflect the POD beneficiary before you leave the bank. Upon your death, the POD beneficiary must present picture identification and a copy of the death certificate before the bank will release the property.

POD Vehicle Registration

If you live in Arizona, Arkansas, California, Connecticut, Delaware, Illinois, Indiana, Kansas, Missouri, Nebraska, Nevada, Ohio or Vermont, you can add a POD beneficiary to your vehicle title. You retain the right to sell the vehicle, change the beneficiary or revoke the POD. After your death, your beneficiary must apply for a new certificate of title and provide a copy of the death certificate to have the vehicle re-titled in his or her name.

POD Real Estate

Eighteen states -- Arizona, Arkansas, Colorado, Hawaii, Illinois, Indiana, Kansas, Missouri, Minnesota, Montana, Nebraska, Nevada, New Mexico, North Dakota, Ohio, Oregon, Oklahoma and Wisconsin -- allow you to leave real estate to a POD beneficiary. A new deed must be drawn up naming the POD beneficiary. The deed must be witnessed, notarized and recorded in the municipality's public records. Upon your death, the real estate will pass directly to the POD beneficiary outside of your estate.

 

About the Author

Based in St. Petersburg, Fla., Karen Rogers covers the financial markets for several online publications. She received a bachelor's degree in business administration from the University of South Florida.

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