POD account designations are just one estate planning tool.An estate plan may include many different ways to make the transfer of property as painless as possible for your heirs. One of the easiest methods of passing on cash assets is by assigning a beneficiary to your bank accounts, commonly known as a payable-on-death (POD) designation. 

While a POD account can simplify your probate proceedings and allow your heirs immediate access to funds, there are a few pitfalls of these designations that could put your earnings into the wrong hands. The best way to ensure your POD accounts are being put to good use is to consult with an experienced New York estate planning attorney.

Benefits of Payable on Death Designations in New York

Under New York state law, you can add a POD designation to checking accounts, savings accounts, savings bonds, and certificates of deposit. Not only is it free to add a beneficiary to the account, but it also offers a number of other advantages:

  • It’s easy to set up. In order to convert an account to a POD account, you will need to inform your financial institution of the change. Your bank or credit union will send you the beneficiary designation form, you provide the name and contact information of your chosen beneficiary, and the bank keeps the information on file.
  • It avoids probate. New York POD accounts pass to your beneficiaries outside of a will, meaning they will not need to go through probate. Upon your death, the beneficiary (or beneficiaries) named on your account simply has to take a copy of your death certificate to the bank and provide proof of their identity. Once they have been certified by the bank, your beneficiary will be able to access the funds as if they have always belonged to them.
  • It is only activated upon your death. Your beneficiary will not be able to access your accounts or have any right to your funds until your death. You maintain full control over your bank balances while you are alive, up to and including spending all of the money or closing the account.
  • You can change it at any time. You can remove or change the beneficiary designation on a POD account whenever you wish. 

Potential Problems With POD for Bank Accounts

The biggest problem with POD designations is that they are often forgotten once an initial beneficiary has been named. It’s possible that a cousin, grandparent, or friend could receive funds from a bank account you set up decades ago, simply because the form was never updated.

A POD designation may not protect your assets if:

  • You are incapacitated. A POD account will not transfer to a beneficiary if you are in an accident, suffer dementia, or are otherwise incapacitated. If you do not have other estate planning in place to protect you during incapacity, your relatives may need to perform conservatorship proceedings before gaining access to your accounts.
  • It was not updated after a major life change. If the beneficiary dies before the account holder and the designation is never updated, the bank account will end up going through probate in order to determine the rightful owner. Similarly, if the beneficiary designation is never updated after divorce, an ex-spouse may legally inherit the funds.
  • It’s on a joint account. The beneficiary to a jointly-owned account cannot access the funds until the last owner dies—and the last owner can change the designation. Consider the problem: a joint account names a couple’s third child as beneficiary. After one spouse dies, the surviving spouse inherits the account and changes the designation to the firstborn child. 
  • The beneficiary is a minor. If you pass away before your chosen beneficiary has turned 18, the court must appoint a guardian to manage the money on the minor’s behalf—someone who could take advantage of the position.

It is worth noting that POD accounts are only one tool for passing on assets, and would not be used in place of a comprehensive estate plan. At Landskind & Ricaforte Law Group, P.C., we offer practical solutions to difficult problems, allowing you to make decisions with confidence. If you have questions about your future, fill out our quick contact form or call us to learn how we can help you with a custom-made estate plan.