Is A “Payable On Death” Account A Probate Asset?
One way to keep certain assets out of probate is to title them as “payable on death” (POD) to a beneficiary. POD designations are commonly used in connection with bank accounts. For example, let’s say Judith wants to leave her checking account to her son Ryan. Instead of leaving him the account in her will, she could register the account as POD with the bank and name Ryan as the beneficiary. This way, when Judith passes away, Ryan automatically inherits the account without the need to go through probate.
It is important to understand that POD accounts are not the same thing as joint ownership. In a joint account, two or more people have equal control over the asset. With a POD account, in contrast, the original owner is not giving up or sharing any control. The POD beneficiary has no legal ownership or title to the account until the owner dies. Indeed, the account owner is generally free to revoke or alter a POD designation at any point before their death.
How POD Accounts Can Lead to Beneficiary Disputes
Because of the nature of POD accounts, it is important to carefully consider the implications of establishing one beforehand. Since a POD account is by definition a non-probate asset, your estate has no role or control over such an account after your death. This could lead to unintended consequences down the line.
For instance, say you have three children. Your will says they will each equally inherit from your estate. But you also decide to name one child as POD beneficiary of a particular bank account to ensure they have sufficient money immediately following your death to pay certain expenses. You might assume that your child will equally share whatever is left in the account with their siblings. But such an assumption does not carry the force of law. Once a POD beneficiary inherits an account, it becomes their property, to dispose of as they wish.
Another issue that might arise is that one of the other siblings might accuse the POD beneficiary of exercising “undue influence” over the parent in obtaining the designation in the first place. If this can be proven in court, a judge could theoretically set aside the beneficiary designation and declare the account a probate asset. While rare, this is not legally impossible.
Is a POD Account the Same as a Trust?
POD accounts are sometimes called a “Totten trust” or a “poor man’s trust.” They are not, however, the same thing as revocable living trusts. A living trust may include multiple–and essentially all of–a person’s assets. Like a POD account, assets in a living trust are also classified as non-probate and not subject to the terms of a person’s will.
Contact a Florida Estate Litigation Attorney Today
If you are involved in a potential legal dispute over the disposition of a deceased individual’s assets and need advice from an experienced Pompano Beach estate and trust litigation attorney, contact Mark R. Manceri, P.A., today to schedule a consultation.