What should you know about payable-on-death rules and your estate?

| Feb 3, 2021 | Probate Litigation

When people open financial accounts, such as checking, savings, or money market accounts, they can name a beneficiary who will receive the balance if the owner passes away. This is an important component of an estate plan because it holds more weight than a will. 

There are many reasons why a person should set up the payable-on-death designation. For one thing, it’s free. The financial institution that holds the account will set this up as part of the account setup process. It can then be changed when necessary. 

The process to claim the account

The transfer of the funds in the account should be fairly seamless. Typically, the beneficiary will need to show a photo ID and bring in a certified copy of the death certificate. This can get the assets to a beneficiary fairly quickly — which can help keep them financially stable in a time of need.

Creditors may stake a claim

It’s important to note that it’s possible for creditors to lay claim to the funds in some accounts. If the decedent owes money, the creditor may turn to the bank where they kept a savings or checking account for payment. Even unpaid taxes can be collected from those accounts.

Payable-on-death designation trumps the will

Accounts that have a payable-on-death designation shouldn’t be covered in the will. A payable-on-death designation overrides anything in the will, so it’s very important to make sure that your designations are aligned with your intentions for your heirs. (The benefit of this, of course, is that those assets won’t go through probate.)

There are times when the payable-on-death designation might come into question. Filing a dispute about this is possible if there are appropriate grounds. If you think that there is something amiss with your loved one’s estate and the way their accounts were disbursed, discuss the possibility with an attorney so you can find out what options you have. 

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