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The Difference Between Transfer On Death And Payable On Death


Important elements of the estate planning process often involve helping loved ones avoid probate in the future. Probate can be a time consuming and tedious process, and it often means delaying your loved one’s inheritance for years to come. Probate can also become very expensive and the cost to administer the probate can be paid from the deceased’s estate, meaning your loved ones may also receive less of an inheritance than you had intended.

Many people choose to add beneficiaries to their assets, making the transfer of the property more efficient after they pass away. Two ways to do this are using transfer on death and payable on death, but the differences between these two tools is often misunderstood. Below, our St. Petersburg estate planning lawyer explains what you need to know.

What is Payable on Death?

Payable on death (“POD”) is a specific designation placed on accounts. A POD automatically transfers the funds in an account to a named beneficiary in the event that the original holder of the account passes away. Any POD account does not need to pass through probate in order for the beneficiary receives the funds. POD designations are often used for savings, checking, and money-market accounts.

Using a POD designation has many benefits for the owner of the account. They still have full access to the account and the beneficiary does not have any right to the funds until the owner passes away. Multiple beneficiaries can also be named on a POD account, and the beneficiary designations can be updated or removed at any time.

POD accounts are straightforward to set up. Typically, a POD account can be created by simply filling out a form at the financial institution that houses the account.

What is Transfer on Death?

Transfer on death (“TOD”) accounts are very similar to POD accounts in the way that assets are automatically passed to a beneficiary after the owner passes away. The difference between TOD and POD accounts is that TOD designations are used for transferring securities, such as stocks and bonds and other brokerage accounts. During the owner’s lifetime, they continue to own the account but they can sell or gift the investment. Beneficiaries can also be added at any time, but they do not have any right to the account while the owner is still alive.

TODs also allow loved ones to avoid probate after the owner passes away. Like PODs, they are also relatively easy to set up, and you should periodically review your TOD designation to ensure your beneficiaries are still who you would like to receive the securities upon your death.

Contact Our Estate Planning Lawyers in St. Petersburg for Help with Your Plan

If you have an inheritance you want to leave your beneficiaries, our St. Petersburg estate planning lawyers at Legacy Protection Lawyers, LLP can advise on the options that are right for you and your family. Call us now at 727-471-5868 or connect with us online to schedule a consultation with one of our experienced attorneys.



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