Pay On Death Accounts And ProbateOct 04, 2010 / By: Pablo Palomino, Estate Planning Attorney / Category: Advanced Planning, Estate Planning
Two of the primary objectives of estate planning are asset protection and ease of transference. Nobody wants to see their estate lose value for no good reason, and most people would like to see their heirs receive what has been bequeathed to them in a timely manner without a lot of hassles or red tape. Estates typically must pass through the legal process of probate, and this involves filing reams of paperwork with the probate of surrogate court and slowly wading through the process. In California the process of probate usually takes somewhere in the vicinity of eight months, and it can take longer if the estate is contested. The cost of going though probate is generally going to be around 5% of the value of the estate.
Getting back to our original estate goals of retaining the value or your assets while making it quick and easy for your heirs to get their inheritances, you can see that probate is the proverbial fly in the ointment. This is why you hear so much in estate planning circles about avoiding probate, and one way of doing so is with pay on death (POD) or transfer on death (TOD) accounts.
These accounts are rather self explanatory. If you open a pay on death bank account, you name a beneficiary, and that person will assume ownership of the account when you die. This can also be done with securities via a transfer on death arrangement. In the state of California and a handful of others, vehicle ownership can be transferred in this manner. Asset transference via POD and TOD accounts are direct and immediate, and these transactions are not subject to probate.
If you want to keep it simple and avoid probate, POD and TOD accounts may be a good choice for you. It is said that the simplest solution is the best one, and these accounts are indeed elegant in their simplicity and a very useful component to many estate plans depending upon the specifics of the estate in question.
Legacy APC, A Trusts & Estates Law Firm is a member of the American Academy of Estate Planning Attorneys.