What is a POD Account?
A “POD” account is a “payable on death” account. It can be created at a bank or credit union and is transferrable upon your death to your designated payee.
Sports Grind Entertainment’s recent article entitled “Payable on Death (POD) Accounts” explains that there are different reasons for including a payable on death account in your estate plan. Keep in mind, however, that the article was written from the perspective of a person living outside of Louisiana. It’s sometime said in jest that “Texas is like a whole other country.” When it comes to Louisiana, however, it is really true, especially when it comes to the law.
Does a POD account avoid probate in Louisiana as some claim? The practical answer is that “it depends”. But the technical answer is “no”. Misunderstandings with respect to POD accounts can be very dangerous and possibly create litigation between family members after you die. I will explain with a simple example.
Suppose you have $100,000 in an account and your banker suggests making it a POD account to “avoid probate”. You take his advice and your name one of your two children, your daughter, as the payee because she provides the most care for you. That seems reasonable. However, your Last Will and Testament provides that you leave your property equally to both of your childresn, your daughter AND YOUR SON. When you die, the bank will pay the $100,000 account directly to your daughter. But under the laws of Louisiana, the POD account is still considered to be a “probate asset” and it technically will devolve under the law pursuant to your Will. Your son now effectively has a right to sue your daughter for his one-half (1/2) of the account, or $50,000 through the probate process. Do you see the problems this can create?
Don’t get me wrong, a POD account can work in certain circumstances, but you have to be careful with them in Louisiana. You should know how they work in Louisiana when deciding whether to create one. Talk to an experienced Louisiana estate planning attorney who can help you coordinate your investment goals with your end-of-life wishes and make sure that you don’t create a litigation time bomb set to go off after you die.
If managed and planned for properly, there are several benefits with POD accounts to transfer assets. This is an advantage if you want to make certain your payee can access cash quickly after you die. Even if you have a will and a life insurance policy in place. Those do not necessarily guarantee a quick payout to handle things like burial or funeral expenses or any outstanding debts that need to be paid. A POD account could help with these expenses. A POD account may indeed “avoid probate” as some claim in the right circumstances. It just depends.
Know that POD account payees cannot access any of the money in the account while you are alive. That could be an issue if you become incapacitated, and your loved ones need money to help pay for medical care. In that situation, having assets in a trust or a jointly owned bank account could be an advantage. You should also ask your estate planning attorney about a power of attorney (or “mandate” in Louisiana), which would allow you to designate an agent to pay bills and the like in your place.
If you are interested in creating a payable on death account, the first step is to talk to your bank to see if it is possible to add a payee on death designation to any existing accounts you have, or if you need to create a new account. Then, take the important next step and talk to an estate planning attorney to avoid any litigation time bombs. BOOK A CALL with Ted today to discuss more details.
Reference: Sports Grind Entertainment (May 2, 2021) “Payable on Death (POD) Accounts”