What is a Payable on Death Account?
A payable on death account, also known as a poor man’s trust, is an account in which you are in total control. You will be able to control your money and determine who will be titled the beneficiary of the account. In the event of your death, the asset of the account will be passed directly to the beneficiary and will not go through your probate estate. To set this up you have to properly notify your bank, CD or account holder that you want to have a designated beneficiary.
Benefits of Payable on Death Account
As long as you are alive, in a payable on death account the person you named as a beneficiary has no rights to the account. You will have full access to your money. You can spend it, keep it, or change your beneficiary at any time. The only time it becomes permanent is upon your death and the beneficiary receives the money.
Cautions of Payable on Death Account
Keep in mind, you can not shortchange creditors or your family with a payable on death account. Avoiding probate does not avoid your legal obligations. In the event that you don’t leave enough assets to pay your debts, taxes, or to support your spouse and minor children, a payable on death account may be subject to the claims of creditors or your family.
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