Choosing a Beneficiary for a P.O.D

P.O.D. stands for Payable On Death bank account, which is a kind of personal trust for which you can name a beneficiary. A P.O.D. allows you to leave a certain amount of money to a friend or family member without going through probate court or expensive attorneys. If you’ve decided that a P.O.D. is the best way to go, here are a few tips for choosing the beneficiary.

Choosing a Beneficiary for a P.O.D.: Children

While it is perfectly acceptable to name a minor child as the beneficiary of a P.O.D., you must think about the consequences if that child were to still be a minor when you pass away. The best way to avoid any problems that might cause is to arrange for an adult (the child’s parents, perhaps) to manage the funds until the child reaches his or her eighteenth birthday.

If you don’t, the parents of the child might have to go to court to attempt to gain custodianship over the money you have left. This can be a long, drawn-out process that you will probably want to avoid. When you set up your P.O.D., you can simply name the child’s parents (or a guardian) as the custodians of the money until the child’s eighteenth birthday.

Choosing a Beneficiary for a P.O.D.: Multiple Beneficiaries

It is not uncommon for an individual to set up a P.O.D. for more than one person. If you have two children, for example, you might want to leave both children equal shares of the P.O.D. This is perfectly acceptable as long as you are clear that all beneficiaries will retain equal shares.

P.O.D.’s are simple, but not without a price. Most P.O.D. bank forms contain three spaces for beneficiaries, but there is only one way that those beneficiaries will inherit your money. In most states, you can’t set up a P.O.D. in which one person receives Ã?¾ of the money, while another receives only Ã?¼. Likewise, you cannot name alternate beneficiaries on one account. In other words, all of your beneficiaries will receive equal shares.

Choosing a Beneficiary for a P.O.D.: Institutions

In some states, a P.O.D. can only be left to a “natural person”, and not a corporation or entity. This can be frustrating if you have decided that you want to leave your money to a church, school, charity or advocacy group.

Although most states have changed the “natural person” law, you’ll want to check with your bank to make sure that your desire to leave your money to an institution will be honored.

When setting up a P.O.D. bank account, try to think through every logical circumstance that might thwart the beneficiary of the funds. Discuss the situation at length with family members, and make sure that your bank is clear on your wishes. If a banking representative doesn’t think that a P.O.D. will work for your situation, he or she is obligated to say so if you ask.