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Joint and POD accounts may not be the best way to avoid probate

On Behalf of | Jul 28, 2021 | Estate Planning |

Using payable on death, or POD, and joint bank accounts is one way to avoid probate when a loved one passes. However, these financial tools may not be the best choice for Florida residents as they can cause problems in certain situations.

Problems with joint accounts

Many people like the idea of joint accounts when they consider estate planning as the account transfers automatically to the other person whose name is on the account as soon as the survivor can provide the death certificate. Once this occurs, the financial institution will remove the deceased’s name from the account. However, leaving someone in full ownership of a joint account can disinherit other beneficiaries and subject the survivor to:

• Gift taxes on the federal and state levels
• Lawsuits if one of the joint owners has been sued
• Forced guardianship or conservatorship for owners who are minors

Problems with POD and TOD accounts

POD accounts, also called transferable on-death accounts, can also come with problems. The account automatically transfers to the survivor upon presentation of a death certificate. Like joint accounts, POD accounts will shut out other beneficiaries, yet they have another problem. If a designated beneficiary dies before the owner of the account and is not replaced, survivors may have difficulty determining how to split the proceeds.

Avoiding beneficiary problems

Although avoiding probate is an important part of the estate planning process, you should consider various options when planning how to leave your assets to loved ones. Fully examining your options may help you devise the best possible plan.

You should also realize that trusts, designated beneficiaries, and other aspects of distributing wealth can be changed at any time. Periodic reviews of your estate can ensure that all components and beneficiaries remain up to date.