There is nothing wrong with simple solutions in many cases, but when it comes to estate planning it is important to think things all the way through. You can hear about a course of action that seems like a great idea that will serve your purposes only to find out later on that you didn’t “read the fine print,” as it were. This is something to keep in mind when you consider the benefit of payable on death or transfer on death accounts.
These types of accounts are available at banks, credit unions, and many brokerage firms. When you open the account you are able to add a beneficiary and in some cases multiple beneficiaries who would assume ownership of the funds in the account upon your death. This transfer would take place outside of probate, one feature proponents of payable on death accounts like about them.
On the other hand, you have to understand some of the limitations. For one thing, because you have incidents of ownership, these resources are part of your estate for estate tax purposes. In this case, you’re not going to gain any estate tax efficiency by using a POD account. Plus, there are issues if a designated beneficiary predeceases you.
The matter of incapacitation is an issue as well because these accounts do not in any way help to prevent guardianship proceedings.
Payable on death accounts are an option but they are not a cure-all. The best way to put together a plan that accomplishes all of your objectives in an optimal fashion would be to sit down and work together with a licensed, experienced Oklahoma City estate planning lawyer.
Author, President and Founding Attorney
Parman & Easterday