What’s better, a POD account or a will?
I hate to do it, but I have to give you the lawyer’s answer: it depends. A POD account, a will, or a combination of both may be the best for your heirs. Which is best will depend on your heirs and how much assets you have. Speaking very, very generally–a POD account may be best when you have very little assets, whereas a will is better when you may need a little more flexibility.
What is a POD account, anyway?
POD stands for “payable on death.” POD accounts are also sometimes referred to as “Joint Tenants with Right of Survivorship” (“JTWROS”) accounts. If it’s a brokerage account that holds investments, the account will probably be referred to as a “Transfer on Death” (“TOD”) account.
Regardless of the name, this is a kind of account in which its contents transfer AUTOMATICALLY to the named beneficiaries upon your death. When you die, your beneficiary (or beneficiaries) will march down to the bank with death certificate in hand. Once the bank gets the death certificate, it automatically gives the money (or stocks, etc.) to the beneficiary.
The POD designation you make on the account is basically a contract whereby you agree that the property in the account will go directly to the beneficiary. And, because you have a contract with the bank, the probate court is completely separate from this. Yes, that means a POD account is an effective way of giving money to your heirs outside the probate process… which can be a good thing or a bad thing, depending on your situation.
Using a POD account to bypass the probate court may actually be counterproductive if you want to have your will determine where your money goes. For example, let’s say you have a bank account with $24,000 in it. If you have a POD account that names three beneficiaries, each will take 1/3 ($8,000 each). What if you wanted two of the beneficiaries to take $10,000 each and the third beneficiary to only take $4,000? Well, then, the POD account wouldn’t work. If you wanted an unequal distribution, you would need to have a non-POD account and have your will explain how you’d like the money distributed.
Your will doesn’t affect a POD account. So, if you have a will drawn up that says where you want all the money in your bank account to go, but you only have a POD account–the POD beneficiary designation trumps your will. Your will loses that battle, and the named POD beneficiary will take the money.
There are lots of reasons not to have POD accounts, but many banks push POD accounts on their customers. The banks like POD accounts because they’re easy for them to do and probably also because the bank knows your beneficiary is likely to just leave the POD account monies at that bank after you die. Some banks will even tell you that you must make the account a POD account, which, by law is incorrect.
If your account is not POD (or “JTWROS” or “TOD”), that doesn’t mean your heirs are going to have a tough time getting their inheritance. The executor will be in charge of distributing the property in accordance with your will. To get access to a non-POD account, your executor will likely have to show the bank the letters testamentary (the papers the probate court gives you when it accepts your will as valid in the state of Texas).
Bottom line: find out whether your accounts are POD or not. Then, decide if you want to change them. If the bank tells you that you can’t change your POD account, educate them. The Texas Probate Code sections 439 and 440 say that you can demand your account be made non-POD upon written request.
If you’re really unsure what to do, contact a Dallas wills lawyer / Richardson wills attorney. If your loved one has already passed away and you’re an heir, executor, or POD beneficiary, you should consider contacting a Dallas probate lawyer / Richardson probate lawyer.
Isaac Shutt is the Attorney/Owner at Shutt Law Firm PLLC. Visit http://www.shuttlawfirm.com or email email@example.com. You can also call Mr. Shutt at (214) 302-8197 for more information on the topic discussed in this blog or to discuss a different legal matter. Phone-calls and quick e-mails are always free at Shutt Law Firm PLLC. Please consider the Shutt Law Firm if you’re looking for a Richardson probate lawyer, Richardson wills lawyer, Richardson estate planning attorney, or Richardson guardianship lawyer.
DISCLAIMER: Nothing in this blog post constitutes legal advice. If you have a legal question, you should consult an attorney. Further, nothing in this blog shall be construed to have started an attorney-client relationship. No such relationship exists until you sign an engagement letter with the Firm.