When someone passes away, most of their estate will go through probate. If they have a will and an estate plan, this can help govern how assets will be distributed to beneficiaries. If they do not, then the process is handled under state law.
However, there are certain types of assets that skip probate. One example is a Totten Trust, or a payable-on-death account. It still passes on to the next generation, but it does not have to go through probate to do so.
Naming a beneficiary on the account
With a POD account, the account holder names a beneficiary in advance. For example, an elderly individual could name their firstborn child as the beneficiary on the bank account.
When that person passes away, the selected beneficiary becomes the owner of the account. This means that those assets leave the elderly person’s estate and do not have to go through probate with the other financial assets that they owned. They are immediately owned by the adult child.
There can be some significant benefits to doing this. For one thing, the beneficiary may get their funds much faster, as probate can take months and could take longer if there are any disputes. Another benefit is that, while an estate plan can sometimes be challenged, a POD account generally cannot. This simplifies the process and means that those assets are outside of any estate disputes that may arise.
Navigating probate
It is important to know how probate works, what assets are included, and which ones are not. Those going through this process must be well aware of their legal rights and options.