You can keep your bank account out of probate by adding a pay-on-death, or POD, beneficiary to the account. The POD is also known as a transfer-on-death, or TOD, account, also called a Totten trust. Your bank or credit union will add the beneficiary to your account free of charge. You can change the beneficiary as often as you like. After your death, your beneficiary will have to present photo ID and a certified death certificate before the bank will release the funds.
When you name a POD beneficiary, you do not give up control or ownership of your bank account. The POD beneficiary cannot withdraw or deposit money into your account. The beneficiary is not entitled to receive correspondence or financial statements from the bank. Upon your death, the account ownership will automatically pass from you directly to your named beneficiary. Your beneficiary will have immediate access to the funds in the account.
Designate a Beneficiary
Some people should not be named as POD beneficiaries. Your bank may not release the funds if your named beneficiary is a minor. Instead, a court may require that a guardianship be established to handle the money for the minor. If you name a special needs person as beneficiary, the amount of money in the bank account may be enough to disqualify him from receiving government assistance. Consider the money skills and maturity level of your intended beneficiary. It may not be a good idea to give a large sum of money to a grandson who spends money faster than it’s printed.
Open the Account
You must go to your bank in person to add the beneficiary to your account. Bring along your photo ID, bank account information and beneficiary information. If you want to name multiple beneficiaries, you will need each beneficiary’s name and address. Your beneficiary does not have to be there, and there is nothing for the beneficiary to sign. The bank will provide you with the form to add the beneficiary. Be sure the bank knows you want the account to be a POD account. You can make an existing account POD or open a new account and designate that one as POD.
Change Your Beneficiary
You might want to change your POD beneficiary if your circumstances change. If you divorce but your former spouse is still listed as the POD beneficiary, the money will still go to her unless you change the beneficiary. If you named your irrevocable trust as POD beneficiary, you cannot change the beneficiary designation. If your named beneficiary dies before you and no one else is listed as the POD beneficiary, the bank account becomes part of your probate estate. You can avoid these problems by reviewing your account beneficiaries a least every two years.
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