During the creation of a comprehensive estate plan the creator often attempts to achieve multiple goals at the same time. While the division of assets at the time of death is clearly the number one goal of an estate plan, there are commonly other goals included as well. Tax avoidance, probate avoidance, and asset liquidity are among the more common estate planning goals. Designating an account as a “payable on death”, or POD, or “transfer on death”, or TOD is one way to accomplish several of these estate planning goals at the same time.
POD or TOD Account in St Louis MO
The POD designation is often used for financial accounts. In the state of Missouri, when you designate your account as POD it means that you are legally directing the funds held in the account to be paid out to the named beneficiary when you die. In the absence of the POD designation the assets held in the account would become part of your probate estate and, therefore, be tied up in court for months, even years. A POD designation, however, allows the funds to bypass probate and creates estate liquidity for beneficiaries and loved ones.
The TOD designation is similar to the POD designation but is used for assets such as securities (stocks and bonds). The concept remains the same though. Upon your death, the security is immediately transferred into the beneficiary’s name. In some states, vehicles titles can also be changed to a POD or TOD status.
Once important thing to understand when discussing TOD and POD designations in St Louis, Missouri is that using the designation does not create any ownership rights for the beneficiary while the original account holder is alive. In other words, if you change your bank account to a POD designation and name your oldest child as the beneficiary of the account, he or she cannot access the account or use the funds held in the account in any way, while you are alive. Upon your death, however, your child can present the appropriate documentation and the funds will be released to him or her.
One drawback to using a POD or TOD designation is that you cannot split the funds unevenly as you can in a Will or trust. For instance, you cannot include three beneficiaries but dictate that one beneficiary gets 50 percent and the other two 25 percent each.