Payable on Death Accounts vs. Joint-Survivorship Accounts?
As we discussed previously, a joint account with the right of survivorship is one that continues in the name of the non-deceased individual upon death. This type of account avoids probate, but allows both individuals to contribute and withdraw from the account during their respective lives. If there are concerns with the flexibility a joint account creates, a payable on death account may be appropriate.
A payable on death account is owned by one person. This person has the ability to appoint a beneficiary who can receive the money that remains when the owner passes away. The owner is in charge of the account and is the only one who can withdrawals and deposits during their life. Upon death, the money automatically passes to a beneficiary.
Like joint survivorship accounts, payable on death accounts avoid the probate process by funding the accounts of beneficiaries at death. Unlike joint accounts, you can name multiple beneficiaries without the risk of giving them access to the account before they die. You can even change beneficiaries as often as you like so long as your bank is informed and permits the change.
A payable on death account is just another tool available if it is your desire to avoid significant time in the probate process. However, it is still subject to estate taxes and does not allow you to control the purpose of the assets. A payable on death account is not a cure-all, but can assist in creating generational wealth for your family.