Atlanta Financial Newsroom

Using P.O.D. and T.O.D to Avoid Probate

Using POD & TOD
Michelle T. Thompson, Esq., CFP®, CTFA, CDFA®
June 12, 2019

Like any court system in America, Probate Court is a slow and sometimes complicated process that can delay estate distributions for months, and in extreme cases, years. While Georgia’s probate system is simpler than many across the US, probating a Will can also be expensive, with the filing fees, administration fees, and other court costs. And since it’s a public process, anyone can obtain a copy of another person’s Will.

With certain assets, you can easily avoid probate and have the asset(s) transfer directly to the person you choose. Typically, these assets are generally accounts deemed “payable-on-death (POD)” or “transferable-on-death (TOD).” The terms essentially mean the same thing but apply to slightly different accounts.

With both types of accounts, the assets bypass probate and pass directly to your named beneficiary. Furthermore, with a POD/TOD account, you can name a new beneficiary at any time, you are not required to leave any money in the account, and your beneficiary’s creditors cannot seize the asset in your account while you are alive. Before setting up one or multiple accounts, consider these points:

  • How many beneficiaries will you name?
  • How will you divvy up the account?
  • What if the beneficiary predeceases you?
  • Is a Will or Living Trust a better option?

Despite their simplicity, one major concern with POD/TOD-titled assets is the lack of awareness or poor coordination with overall estate planning strategies. For example, some people may not bother renaming a beneficiary of a POD/TOD account, believing that the most current version of their Will dictates who will receive the funds. This is not the case, however, because POD/TOD-titled assets override whatever is stated in a Will.

Additionally, many people simply forget who they’ve named as a beneficiary, and as a result, the proceeds of the account go to someone other than who the owner desired. For example, forgetting to rename the beneficiary on your IRA could mean that your ex-spouse ends up with the proceeds, as opposed to your current spouse. Similarly, forgetting to update your retirement account you started 30 years ago could lead to your brother receiving the funds rather than your children. Therefore, it is important to review your POD/TOD accounts on an annual basis, or after a major life event, to ensure all assets pass to the intended beneficiary.

If you have questions about your current estate plan, give me a call at 678-282-0296 to discuss your specific questions, or to arrange a review of your entire situation as part of our complimentary Second Opinion Service.

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