When Payable On Death Beneficiaries Do Not Work

​When you open a bank account, your banker will probably ask whether you want to designate someone as a payable-on-death (POD) or transfer-on-death (TOD) beneficiary. These designations mean that when you die, all of the money in your account will be split equally among the specified beneficiaries. As you can imagine, POD and TOD beneficiary designations can be useful estate planning tools.
 
But what happens if your payable on death and transfer on death beneficiaries do not outlive you?
 
For one, unless the account paperwork clearly says otherwise, in order to receive their share of your accounts, your payable on death beneficiaries must outlive you. If they don’t, the POD beneficiary designation doesn’t transfer anything to your beneficiaries’ estates.
 
For example:
Let’s say your two children are your payable on death beneficiaries, then when you die, your two kids split the money in your account. However, if one of them passes away before you do, the remaining child will receive all the money in that bank account. This is probably fine in most cases, but what if you had young grand kids from the child that passed away? Your child who did not have grand kids would receive everything in the payable on death account and your grand kids who may need the financial help are left with nothing. Most people prefer half the money in the account to go to their remaining child and the other half to be split among their grand kids from their deceased child. This is just one example when having your children as payable on death beneficiaries might not be the wisest choice. Using a Will and the Probate process or a Trust might be a better option.
 
Preparing your Last Will and Testament, Revocable Living Trust, and other estate planning documents takes thought and experience. Call our office to set up an appointment with an experienced estate planning lawyer.