When you start to probe into the subject of estate planning you invariably hear talk about payable on death or transfer on death accounts.These accounts allow for a beneficiary or beneficiaries to assume ownership of the resources remaining in the account after the death of the primary account holder.
On the surface this can seem like a very useful and simple solution when you are planning your estate. However, there are some shortcomings to consider when you talk about payable on death accounts.
One important thing to take into account is the possibility of estate tax exposure. If the overall value of your estate exceeds the estate tax exclusion amount you are going to have to take steps to reduce the taxable value of your estate. When you place resources into a payable on death account you have incidents of ownership and as a result these assets are part of your taxable estate.
Another factor that makes payable on death accounts less attractive is the fact that many financial institutions will not allow you to split the resources among multiple beneficiaries in different percentages. They require you to allow for the assets to be split among the beneficiaries equally, and you may not want to divide the resources in this way.
Payable on death accounts are also not going to address the matter of who handles the assets in the event of your incapacity. Your beneficiary does not have access to the funds until you actually pass away.
POD accounts are not a comprehensive solution. The best way to plan for the future is to sit down and discuss all of your options with a licensed and experienced Central New Jersey estate planning lawyer.
Alan Augulis, Estate Planning Attorney
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