A payable on death account is, in many ways, a normal bank account. The difference is simply that you can pick a beneficiary for that bank account. If you pass away, this beneficiary just has to present proof of your passing to the financial institution. They then take over as the new owner of your account.
This is an alternative to passing assets through a will or an estate plan. If the money was left directly to the beneficiary in the will, the estate executor would access the account and then transfer those funds into their name. But with a POD account, the beneficiary just takes over and there is no need for the estate executor to address the issue.
This often makes the process faster
Doing things this way keeps the money out of probate, which often means that the beneficiary gets access to it much more quickly. It may only take them a few days to be granted ownership of the account. This can be highly beneficial for the family if they need quick access to funds to address the funeral and other things of this nature.
Another potential advantage is that a payable on death beneficiary designation cannot be disputed. If the assets are left through a will, another beneficiary could theoretically start an estate dispute if they believe there’s a serious issue like fraud or undue influence. But a POD account isn’t part of the estate, so the transfer can’t be disputed by anyone else in the family.
As you can see, there are many different estate planning tools to consider, and it’s important to know what options you have.