Pay On Death accounts (PODs) add an interesting twist to the probate process.
This post is a continuation of the probate process that began last month when my brother-in-law died unexpectedly without leaving a will.
In early December, my husband was appointed temporary administrator of his brother Adam’s estate. At the upcoming January 22 court date, he should be appointed the permanent admin. So far, he has cleaned out the house, looked though stacks of papers in search of unpaid bills and bank statements, and complied with the judge’s orders.
The orders include trash removal, listing assets, and opening a blocked account at the bank where all money goes. With a blocked account, all withdrawals must be approved by the court.
Adam had four accounts at two different banks. The biggest account had a little more than a hundred thousand dollars, and the remaining accounts total about twenty thousand. Because the house is in serious disrepair and should be torn down, my husband was relieved to discover that money is available for clean-up and perhaps removal.
But wait. The biggest account was POD—Pay on Death. Earmarked for three of Adam’s friends, the funds are simply not available for anything having to do with the estate. This means that until the house is sold, any debt, repairs, or reimbursement will have to wait. Even if Adam died leaving thousands in unpaid bills, that money can’t be touched—at least in states like California.
Logically, this seems wrong. However, the law isn’t always logical.
The post, “What Happens to a Payable on Death Account When the Owner Dies?” by Julie Garber clarifies the situation. “In some states, if the POD beneficiaries are not guarantors or co-signors of the debt, then the beneficiary will be able to have immediate access to the POD account, while in other states each POD beneficiary may have to sign an affidavit confirming that the POD account owner did not have any debt prior to collecting the money remaining in the POD account.”
According to the probate lawyer hired by my husband, California gives POD recipients immediate access. Good news for the beneficiaries. Bad news for Adam’s estate administrator.
It turns out that POD accounts avoid probate completely. This means if you have a bank account and want to make sure that your friend, kids, or Secret Santa inherit your money, all you must do is put their name on the account. Simple. Done.
It also means that if you find yourself as the administrator of a probate situation, before you accept, you might want to make sure there’s cash on hand to get the job done.
Most people who have been through a probate situation will tell you that it’s complicated, difficult, and often confusing. Keep in mind, it’s also an opportunity to learn something new.