When you open a bank account or a brokerage account, the counselor that you speak with may inform you about the possibility of adding a beneficiary to the account. The beneficiary would not be able to touch the assets in the account while you are living. After you die, the beneficiary would assume ownership of anything that may remain in the account. These accounts are called POD accounts (The acronym stands for “payable on death.”)
This can sound like an estate planning solution. Many people will fail to execute a proper estate plan because they assume that assets that they have in one or more of these accounts will wind up in the hands of their loved ones after they are gone.
In some cases, a single POD account beneficiary is named, and the account holder tells the beneficiary to distribute the assets in a certain manner. This can sound like a simple and straightforward solution on the surface, but there is a cold, harsh reality to consider: The beneficiary would be legally compelled to do no such thing. How can you be sure that the beneficiary will follow your verbal instructions after you are gone? People that you love could be unintentionally disinherited.
You could potentially avoid this outcome if you were to name multiple beneficiaries when you create your POD account, and some financial institutions will allow for this course of action. However, in many cases, you would be required to approve equal distributions of assets that remain in the account after your passing. This may not be consistent with what you really want.
There are no tax advantages, and there is no asset protection when you create a POD account. Plus, the resources in the account would be your personal property. Many seniors apply for Medicaid coverage late in their lives, because Medicare does not pay for long-term care. You cannot qualify if you have more than $2000 in your own name.
Incapacity planning is another consideration. A significant percentage of elders become unable to make sound decisions at some point in time. As a result, a well constructed estate plan will include an incapacity planning component. Durable powers of attorney are used to name agents to act on behalf of the grantor in the event of his or her incapacitation.
If you think that a POD account will be all that you need, and you do nothing to prepare for incapacity, the state could appoint someone to manage your affairs if you were to become incapacitated at some point in time.
Don’t Accept Incomplete Solutions
Estate planning is an important responsibility, and you should do all the right things to protect yourself and the interests of the people that you love. Our firm can help you put a personalized plan in place if you are convinced, and you can feel free to contact us through this page to set up a no obligation consultation: Grand Forks ND Estate Planning Attorneys.
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