Simplify Estate Transfer with TOD/POD Properties – But Tread Carefully

Estate planning often involves seeking strategies to streamline the transfer of assets after death and avoid probate—a typically lengthy and complex legal process. One such strategy that’s become popular due to its relative simplicity is the use of Transferable on Death (TOD) and Payable on Death (POD) properties. Let’s delve into this approach and understand its merits and potential pitfalls.

Understanding TOD and POD Properties

In simple terms, Payable on Death (POD) bank accounts and Transferable on Death (TOD) brokerage accounts are financial vehicles designed to transfer assets within the accounts directly to a designated beneficiary upon the account holder’s demise. This direct transfer allows the assets to bypass the probate process.

While these can be effective means to avoid probate and can even offer more control than joint property with rights of survivorship, using TOD/POD assets for estate planning isn’t without its challenges.

Exploring the Limitations of TOD/POD Property

One of the primary drawbacks of TOD/POD properties is their limitation to the original account holder. Beneficiaries hold these assets in their individual names, implying that upon the second death, the assets will require probate unless additional measures are taken.

Also, POD/TOD property typically does not accommodate a contingent beneficiary, meaning if the named beneficiary predeceases the account holder, probate will likely be necessary.

It’s also worth noting that beneficiaries cannot access POD/TOD accounts before the account holder’s death. While this might prevent potential misuse by the beneficiary, it requires additional estate planning or court intervention if the account holder becomes disabled.

Most importantly, planning with POD/TOD accounts primarily aims at avoiding probate—it doesn’t cater to scenarios like transfers to minor children, planning for blended families, divorce protection, creditor protection, Medicaid spenddown protection, etc.

A Balanced View on POD/TOD Accounts

While payable/transferable on death accounts offer an effective and affordable means to avoid probate, an all-encompassing estate planning perspective often suggests the associated risks and inflexibility can outweigh their benefits in many scenarios.

Contact an Experienced Estate Planning Attorney in Raleigh, NC

Remember, good estate planning is about far more than avoiding probate—it’s about creating a plan that meets all your goals and provides for your loved ones in the best possible manner. Need help planning your estate or deciding whether TOD/POD accounts are right for you? Contact Brady Cobin Law Group, PLLC, your North Carolina Estate Planning Attorney, today for a personalized consultation – (919) 782-3500. Let’s navigate your estate planning journey together.