A payable-on-death (POD) designation is a legal mechanism used to designate a beneficiary who will receive the funds of an account, such as a bank account, once the account holder dies. The account holder sets up a POD designation while they are still alive, but the funds to the designated beneficiary will not be available until after the account holder dies. This type of designation is also sometimes referred to as a “beneficiary designation” or a “transfer-on-death designation.”
Understanding POD Designations
When setting up a POD designation, the account holder names a beneficiary who will receive the funds in the account once the account holder passes away. This designation overrides any previous provisions made in a will or trust. In addition, the POD designation is also often used to avoid probate court proceedings, as the funds are directly transferred to the beneficiary without having to go through a lengthy court process.
When an account holder with a POD designation dies, the beneficiary listed on the form needs to submit a valid death certificate to their financial institution in order to claim the funds. Additionally, the beneficiary may be asked to show some form of personal identification to verify their identity. Once the documentation is provided to the financial institution, the transfer of funds can be completed.
Ensuring Your POD Designations Are Valid
Due to the nature of these designations, it is important to update POD designations whenever necessary. If there is no updated POD designation and the account holder dies, the funds will be passed to the estate rather than the designated beneficiary. To make sure these designations stay up to date, account holders should review and revise them every five years or so.
POD designations are a simple and powerful legal tool used to ensure that a person’s assets are passed to their designated beneficiary after they have passed away. By understanding how POD designations work and ensuring they are updated as needed, account holders can rest easy knowing that their assets will be dispersed according to their wishes.