This month’s blog easily applies to virtually every reader who has a checking or saving account or an investment account. We are talking about Transfer on Death (TOD) and Payable on Death (POD) directives.
In both cases, these documents allow you to name a person, or persons, who will take ownership of a financial asset that you currently own. An advantage of TODs and PODs is that they don’t go through a will or probate so the transfer can go quickly and smoothly.
There is a difference between the two in regard to the type of asset you are considering. A TOD applies to investment accounts that typically hold stocks, bonds, mutual funds, etc. Since these funds are not cash, it is better to transfer the assets to a new owner. A POD applies to cash accounts like a checking or savings account. Since these funds are in cash, they can be paid directly to a new owner.
In summary, the function and purpose of these two documents are similar, but the type of asset for each is different.
These documents are free to use and easy to complete. Talk to your financial planner and your bank to handle the details.
TODs and PODs are easy to set up and provide value for you and your estate. At the same time, you need to be careful with implementing these options. Without careful planning, TODs and PODs can lead to results that don’t match your overall estate plan goals. For that reason, it is important to discuss these options with your estate-planning attorney and your financial planner before making your final decisions.