What Are PODS and TODS?
March 21st, 2019
Payable on death (POD) accounts and transfer on death (TOD) accounts are very similar, in that they pass account proceeds directly to the person of your choice upon your death, without going through the probate process. The only difference between the two types of accounts is that PODs are bank accounts, and TODs are brokerage accounts. Depending on your situation, there can be many advantages to keeping assets in these types of accounts.
Among the advantages of PODs and TODs is the fact that you retain complete control over your assets during your lifetime. Whomever you name as the beneficiary of those accounts has no access to those accounts while you are still living. You can choose to spend all the funds or close down the accounts during your lifetime. You can easily change the beneficiary on the accounts as you wish.
Another advantage to these accounts is that they are easy for your beneficiary to access following your death. The bank typically requires only a death certificate in order for the beneficiary to gain access to the funds in those accounts. Plus, you avoid the probate process, which can make your heirs wait months or even years for distribution of your assets, and you avoid paying capital gains taxes on the transfers.
However, there are some disadvantages to PODs and TODs, too. If your named beneficiary passes away before you do, and you have not named a successor beneficiary, then the assets must go through probate to be distributed to your heirs. Additionally, placing assets in a POD or TOD is not a way to protect them from creditors. Any valid creditors at the time of your death can make claims against the assets in your POD or TOD accounts. Likewise, spouses who are not the named beneficiaries of the accounts may be able to bring claims against the accounts.
Our Michigan estate planning attorneys can guide you through every step of creating a comprehensive estate plan for the future to protect yourself and your family. Let us answer your questions about any and all issues related to estate planning, as well as ensure that your current estate plan meets all of your needs. The attorneys at Legacy Law Center have advocated on behalf of many individuals and families throughout the estate planning process. Call our office today and schedule a time to talk with one of our experienced estate planning attorneys.