I was reading “advice” on a support group Facebook page. The author suggested “pay on death” as a way to avoid probate. They said their parents had done this, and it worked so well they thought everyone should do this.
PAY ON DEATH is a way to add beneficiaries to a bank account, brokerage account, or retirement account. The person (or people named) can collect the asset with a death certificate 40 days after death. It is a way to avoid probate and can be a way to leave some money to specific people without putting that in your will and trust. (No one will know)
No one will know who is named as a beneficiary. This could be good (you want to favor someone but not tell anyone) or bad (when your executor/trustee goes to the bank and just finds out that someone is named without knowing who gets the account). This can be a problem. The person named gets the account!! This is true even if they are the ex-spouse, in jail, an old girlfriend, or one of many children.
Pay on Death is a tool to use in estate planning. It only helps at death; the person named can’t help when you are alive.
If you want to know the best way to plan for passing your money when you die, give me a call.
