If you want to avoid probate, you can establish a pay on death (POD) financial accounts. These accounts offer unique features when compared to traditional bank accounts. Here are a few things to consider about pay on death accounts and how they can be used to avoid probate.
Normal Bank Account
If you have a normal bank account and you pass away unexpectedly, the assets in your bank account will go into the probate process. This means that if you have a will, it will go before a probate court in order to determine how to distribute your assets. If you do not have a will, the probate court will have to make decisions for you. It can take a great deal of time to transfer the assets to a beneficiary and they might lose a portion of them in the probate process.
Pay on Death Accounts
A pay on death account can specify a particular person that you want to inherit your assets if you die. Your assets will not have to enter into the probate process, even if the rest of your estate does. With the account, you will choose your beneficiary and the transfer process is easier to transfer.
Joint Bank Account
Instead of using a pay on death bank account, many people simply have a joint bank account with a spouse or loved one. This type of account will allow you to transfer ownership of the assets to the joint account holder if you die. While this feature is similar to a pay on death account, there are a few potential drawbacks with a simple joint bank account.
Joint Bank Account vs Pay on Death Account
With a joint bank account, the joint bank account holder will be able to have full access to the funds whenever they want. This means that if they wanted to spend all of the money in the account, they are free to do so, and you cannot do anything about it. Therefore, if you wanted to leave some type of inheritance to one of your children, a pay on death account would most likely be more suitable. This way, you can have control over the money and you will not have to worry about your child spending the money.
Another potential problem with joint bank accounts is that creditors can access the assets within the account. If one of the individuals that owns a joint bank account gets in trouble with debt, they could have a judgment issued against them. When this happens, the court can rule that part of the funds be used to pay for a debt. If you use a pay on death account, this will not be a problem. You can designate someone to receive the funds, but creditors cannot come after the funds while you are still in possession of them.