A Payable on Death account can be a simple way to ensure money passes to loved ones without the delays of the probate process. For many Denver residents, this tool offers a straightforward way to transfer assets, but it also comes with essential limitations and potential drawbacks. Understanding how it works — and whether it meets your needs — can help you make informed decisions about your financial planning.
What Does Payable on Death Mean
A Payable on Death account, sometimes called a POD account, is a bank or credit union account that names one or more beneficiaries who will receive the funds when the account holder dies. While you’re alive, you retain complete control over the account. You can withdraw funds, change beneficiaries, or close the account entirely. The beneficiary has no rights to the money until your death.
This setup can work well for checking accounts, savings accounts, and certificates of deposit. It allows the financial institution to release the funds directly to the beneficiary once they present a death certificate and required identification.
How a Payable on Death Account Works in Denver
Colorado law recognizes Payable on Death accounts as a valid way to transfer funds outside of probate. In most cases, the process is simple: the bank confirms the account holder’s passing, verifies the beneficiary’s identity, and releases the money. No court involvement is necessary.
Many Denver residents choose POD accounts for their ease of use and low cost. You don’t need a will or trust to set one up, and most banks allow you to update beneficiaries at any time. This flexibility makes them a popular choice for passing on cash assets.
Does Payable on Death Avoid Probate
One of the most significant benefits of a Payable on Death account is that it typically bypasses the probate process. Since the account has a named beneficiary, the funds transfer directly to that person without going through court. This can save time, reduce legal costs, and provide faster access to funds for loved ones.
However, avoiding probate does not mean avoiding all legal considerations. The money in a POD account still counts toward the value of your estate for tax purposes. Creditors may also have a claim if debts remain unpaid. It’s also worth noting that this protection only applies to the funds in the account — other assets may still go through probate.
Disadvantages of Payable on Death Account
While POD accounts can be helpful, they are not the right solution for every situation. Some of the disadvantages include:
No Shared Control or Oversight
Because the beneficiary has no rights until your death, they cannot help manage or use the funds if you become incapacitated. If you want someone to access the account during your lifetime, you may need to add them as a joint owner instead — though that comes with its risks.
Potential for Unequal Distribution
POD accounts pass directly to the named beneficiary, even if your will says otherwise. This can create conflict if other heirs feel left out or believe the distribution is unfair.
Limited Use for Complex Estates
For those with multiple beneficiaries, blended families, or significant assets, POD accounts may oversimplify the process and create unintended results. They do not handle contingencies well, such as what happens if a beneficiary dies before you.
Possible Impact on Medicaid or Benefits
Receiving a large sum from a POD account could affect a beneficiary’s eligibility for specific government programs. This is important to consider if your beneficiary receives disability or income-based benefits.
Planning Beyond a Payable on Death Account
A Payable on Death account can be part of a larger estate plan, but it should not be the only tool you rely on. Many Denver residents use them alongside wills, trusts, and powers of attorney to cover all aspects of asset transfer, incapacity planning, and healthcare decisions.
When deciding whether to open a POD account, think about:
- Who you want to receive the funds, and whether multiple people should share in the distribution
- How this account fits into your overall estate plan
- Whether you have debts, taxes, or other obligations that could affect the transfer
- How your choice might impact relationships among your heirs
Working with an experienced estate planning attorney can help you avoid the pitfalls and ensure your plan works as intended.
Baker Law Group, PLLC, Can Help You Plan
At Baker Law Group, PLLC, we help Denver residents understand their estate planning options and choose strategies that protect their assets and their families. We explain the pros and cons of Payable on Death accounts in plain language, so you can make choices that reflect your goals. Our team takes the time to align your financial accounts, legal documents, and beneficiary designations to prevent costly mistakes and family disputes.
If you’re considering a Payable on Death account or want to review your existing estate plan, our attorneys can guide you through the process with clarity and confidence.
Call Baker Law Group, PLLC, today to schedule a consultation and start building a plan that works for you and your loved ones.
