I have a “poor man’s trust” on all of my bank accounts. Not many banks promote this feature because it means processing an extra piece or two of paperwork, but every financial institution I’ve ever worked for (and I’ve worked for two large national financial institutions and two small community banks) have this option available.
POD is the bank acronym for Payable on Death - the common name for the Totten Trust. I feel strongly that everyone with a net worth under $1 million should add a POD beneficiary to any account or stock on which they are the sole account holder. I typically recommend the POD option to clients that fit the following demographics:
- Anyone with a negative net worth (like me)
- Young people with high student loan balances but significant savings or income
- Retirees with no real assets outside of their bank accounts
By adding a POD beneficiary to your bank account, the account proceeds circumvent probate. The only things the beneficiary (payee) has to do to access their benefit is provide a current photo ID and supply a certified copy of the account holders death certificate to the bank where the account is housed. This feature is why a Totten Trust also referred to as a “poor man’s will.”
There are other benefits of POD accounts:
- It is a revocable trust and the account holder can change beneficiaries at any time so long as they can prove mental competence
- The beneficiary or his/her creditors have no claim on the account until the primary account holder dies
- A certified copy of a death certificate typically costs $15 - $50 depending on the county and can usually be procured within 24-72 hours of a death. The probate process is expensive and time consuming, and life insurance proceeds can take weeks after the benefit event (death) to materialize. Without POD, it could take a loved one months or even years to gain access to account balances, which could put undue financial hardship on those who have to make final arrangements (funeral, burial, cremation, etc.) on your behalf.
There are a few caveats to invoking POD - it can only be used on bank accounts, IRAs, savings bonds, and stocks. It is not applicable to real property or livestock (apologies to all of the ranchers and farmers out there). Laws regarding POD and estates vary (not every state recognizes the Totten Trust), so check to see what’s applicable where you live before adding a POD payee to your bank accounts.
For more information about POD/Totten Trusts, contact your local bank or visit with your attorney.Stumble it!