A payable-on-death account is a financial account that is assigned to a chosen heir upon your death. Many accounts including savings, checking, or retirement may be payable-on-death. There are many benefits to using such an account. Funds in a payable-on-death account may avoid probate, allow your family access to quick cash if needed, and pay your final expenses.
To make an account payable-on-death you will sign a beneficiary designation form with your financial institution. When choosing a beneficiary, you must remember that person will receive all funds. Any others that you wished to receive those funds will be disinherited. Also make sure your chosen beneficiary will not mismanage funds. If so, you may wish to leave an inheritance to that person in a different manner.
Once you have signed your beneficiary designation form, make sure to keep that designation up-to-date. And, be sure to name a contingent beneficiary. Each time you review your estate legal documents, you should also review your account form to ensure beneficiary names are correct and that a pre-deceased beneficiary is not listed. If your beneficiary form is not up-to-date, the account will have to endure probate in order to determine the rightful heir.
Beneficiary Collects Funds
Collecting funds from a payable-on-death account is simple. After you have passed away, your assigned beneficiary can collect funds by presenting a copy of your death certificate and personal identification to the financial institution holding the account. The funds will then belong to that beneficiary. This account will, however, still be part of your taxable estate and must be included in the calculation of your estate taxes.
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