Payable-on-death designations are used on all kinds of financial accounts, including savings and checking accounts. They provide an easy (and immediate) way for money to transfer to someone else as soon as the owner of the account passes away.
But a payable-on-death designation can be problematic and called into question by someone’s heirs for a number of reasons. Anyone who is creating an estate plan (and anybody in charge of someone’s estate) should understand as much as they can about how these designations work.
Payable-on-death designations override what’s in a will
Financial accounts with a payable-on-death designation are governed solely by that designation. In other words, nothing written in someone’s will can override the designation on the account.
Payable-on-death designations can lead to legal disputes in a number of situations. Sometimes, for example, a testator will make their oldest adult child the payable-on-death beneficiary and expect them to share with their siblings. The moral obligation might be there, but they may not have any legal obligation to do so — which will likely lead to trouble.
Sometimes a testator simply forgets who they made their payable-on-death designee, so they write the account into their will and leave the asset to someone else. Quite naturally, that’s going to leave the person named in the will and the person who actually receives the money at odds.
The legal challenges of payable on death designations are often very complex. If you think that there’s a valid issue with a payable on death designation, be sure to review the matter thoroughly. It might behoove you to discuss it with a person who’s familiar with these cases. It’s important that the decedent’s wishes are met.
