POD and TOD Account Disadvantages

Probate Court

POD and TOD Accounts

What are POD and TODs? They are an increasingly popular method of providing for the distribution of financial accounts at your death. They are helpful in certain situations; however, there are critical limitations and risks associated with using them.

Payable of Death (POD)

A Payable on Death (POD) designation is commonly available at banks and used for checking and savings accounts and CDs. Other financial institutions usually use a Transfer on Death (TOD) designation. A POD and TOD are both used to name a beneficiary for which the account balance transfers on death.

  • Advantages
    • Useful for transfer on death in smaller estates of less than $100,000 in total assets with no particular circumstances. (see below)
    • Appropriate for many checking accounts, particularly those held at Chase Bank, to avoid inconveniences.
    • Avoids Probate, but comes with risks.
  • Disadvantages
    • Disinheriting: Regardless of the size of your estate, you might unintentionally disinherit a child or other intended beneficiary. Or the beneficiary might not share the funds with your other children as you had hoped. The account ownership automatically transfers to the only person(s) named on TOD or POD. These funds now become part of the named beneficiaries’ family estate if that person dies simultaneously with you or shortly after your death.
    • Creditors: Since the funds are owned by your beneficiary immediately, they are also subject to any creditor claims, lawsuits, or divorce filed against the beneficiary.
    • Minors: The same as with life insurance policies and deferred compensation accounts and IRAs or other beneficiary designations. If the beneficiary is under 18 at the time of your death, the proceeds or funds go to Probate.
    • Disability: If your beneficiary has a disability now or acquires one from an accident or illness before your death. In that case, the POD and TOD funds could end up with the government or jeopardize their Medicaid and SSI.
    • Predeceased Beneficiary: If your beneficiary dies with you or before your death, the funds are subject to Probate. There are no alternate beneficiaries on TOD/POD accounts.
    • Squandering Inheritance: Statistics show that most inheritance is spent within18 to 36 months. I am confident the time shortens, the younger the beneficiary.

POD vs Living Trusts

I write about Living Trusts frequently because they are much more than an estate plan. Living Trusts organize your assets now and safeguard them after your death. They also can avoid all of the above disadvantages of POD/TOD designations.

Living Trusts also protect your assets from Guardianship Court if you acquire a disability. Additionally, if you are contemplating a second marriage, a Living Trust is essential to segregate your assets from future marital funds acting as prenuptial protection.   

Living Trusts, if Not Now, When?

We all know that we need an estate plan, and we should take care of it sooner rather than later. However, almost everyone procrastinates when it comes to this essential task.

At the end of your life or incapacitation, they risk Probate if you have property, investments, or bank accounts in your name.

Advantages of a Living Trust

  • A Will is Probate. The rule is no one can legally sign your name. Therefore, all assets in your name are subject to the Probate process, which averages 18 months and is costly.
  • A Living Trust completely avoids Probate.
  • Your financial accounts, life insurance policies, and deferred compensation accounts can name your Living Trust as the beneficiary. This is subject to essential tax considerations.
  • A Living Trust estate plan includes both Health Care and Financial Power of Attorney documents. It also consists of a Last Will and Testament. A Will is necessary for guardianship of minor children. It also transfers assets in your name out of Probate.
  • A Living Trust contains a No Contest provision and beneficiary Asset Protection clauses.

Comprehensive Benefits of America

For an expanded presentation of asset protection and financial wellness strategies and to receive regular updates on strategies to protect what you have earned, visit and register with CBAPlan on the link below. Registration is free.

Tom Tuohy is the founder and CEO of Comprehensive Benefits of America, LLC, and Tuohy Law Offices.

312-559-8444
17W220 22nd Street  
Oakbrook Terrace, Illinois, 60181

The information being provided is strictly as a courtesy. When you link to any of these websites provided herein, Comprehensive Benefits of America, LLC/ makes no representation of the completeness or accuracy of information provided at these sites. CBA does not provide professional financial, investment, tax, or legal advice. You should seek certified financial planners, CPAs, and attorneys for advice relative to your personal needs. See complete Disclosures and the CBA Security and Privacy policies.

Know Your Health Care Rights

We have all experienced the health care system. Honestly, can you say you are looking forward to your next experience? Part of it is the uncertainty of what we will find out. However, most of our anxiety and frustration is about the feeling we are not in control. Well, you can be, and you have the right to be in total control of your health and your care.

HIPPA

The Health Insurance Portability and Accountability Act of 1996 (HIPAA) is an often abused federally protected patient health care protection.  Unfortunately, most of us roll our eyes at the mention of those letters, because typically the process brings bureaucratic delivery, endless seemingly unnecessary paperwork, and lack of ease. Consequently, HIPPA is often a sword against us rather than a shield protecting us.

Essential Health Care Rights        

HIPPA guarantees your fundamental health care rights:

  • You have the right to request and receive copies of all of your health care records.  Don't let any medical provider tell you differently or delay producing your health care records. I know from legal experience that with medical errors or less than ideal treatment, the production of records slows down. If you are ever on the receiving end of improper care or malpractice, immediately demand to see every single one of your records, including all nurse's notes, lab testing, x-rays, act. This information is essential even if your care was excellent. It is your health care history, and it can be critical to successful and timely treatment in the future.
  • You have the right to share this information with others and request that your provider do so.
  • Your must receive your medical records within 30 days.
  • Medical record production cannot be denied if your bill is not paid in full.
  • You can request delivery of records on paper, digitally, or viewed online. Today, having a digital health care dashboard is a feature that should be common for health care providers. It allows you to have all your records in an easily viewed and indexed digital platform. Your entire health care history can be available to you and, importantly, be available for your subsequent health care treatment and discussion of options.

Informed Consent

This notion that we are in the dark about our health care history and options for treatment and hand over our health and welfare to medical providers is what we grew up expecting.

Most hospitals have patient advocates available to help you fully understand your condition and treatment options. Use them.

Always insist on a thorough and understandable explanation of your treatment, options, expected outcomes, and access to second or third opinions. It is your health and your future.

Health Care Power of Attorney

You have the right to appoint an agent to act on your behalf to make all health care decisions for you if you are unable or unwilling to do so. Therefore, please do not risk leaving that power in the hands of medical providers instead of your family or trusted friend.

Importantly, this essential document also includes your comprehensive instructions on life support, access to your medical records, and whether you wish to avoid prolonged suffering or extend your life for as long as possible. You can also choose to spend your last days at home and provide for your final plans and wishes.

Power of Attorney documents are readily available and customized to your specific wishes. In the POA's I prepare, I include the insistence that your family has access to be with you in your hospital room or to see you electronically via Facetime, Zoom, or other digital means. This recent practice of allowing people to suffer alone and even die alone is unconscionable.

All your health care directives are included in your preferred Living Trust estate plan.

Docubank

Unfortunately, when we seek medical treatment we almost certainly do not have our Health Care POA with us. Today there is a service, Docubank, that will provide you with a wallet card that allows any medical provider to access your POA 24/7 365 anywhere in the world.

Docubank gives clients a 65% discount – only $25 a year for this card that also can include your emergency contact person, family members, and a medical snapshot.  Call our office and we will make sure you are given the discount.  

Living Trusts

At the end of your life, or at incapacitation, if you have property or bank accounts in your name, they risk Probate.

  • A Will must be Probated. The rule is no one can legally sign your name. Therefore, all assets in your name are subject to the Probate process, which averages 18 months and is costly.
  • A Living Trust completely avoids Probate.
  • Your financial accounts, life insurance policies, and deferred compensation accounts can name your Living Trust as beneficiary, subject to essential tax considerations.
  • A Living Trust estate plan includes both Health Care and Financial Power of Attorney documents. It also consists of a Last Will and Testament. A Will is necessary for guardianship of minor children. It also transfers assets in your name out of Probate.

Comprehensive Benefits of America

For an expanded presentation of asset protection and financial wellness strategies and to receive regular updates on strategies to protect what you have earned, visit and register with CBAPlan on the link below. Registration is free.

Visit www.cbaplan.com or call 1-312-559-8444 for assistance with registering.

Tom Tuohy is the founder and CEO of Comprehensive Benefits of America, LLC, and Tuohy Law Offices.

The information being provided is strictly as a courtesy. When you link to any of these websites provided herein, Comprehensive Benefits of America, LLC/ makes no representation of the completeness or accuracy of information provided at these sites. CBA does not provide professional financial, investment, tax, or legal advice. You should seek certified financial planners, CPAs, and attorneys for advice relative to your personal needs. See complete Disclosures and the CBA Security and Privacy policies.

Have Your Beneficiaries Been Updated Lately?

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Family Planning

You may have heard the horror stories of officers who divorced and never changed their insurance policies, deferred comp beneficiaries, or estate plan, and the ex-spouse got it all. It is easy when hearing dramatic stories to assume you are safe. But are you?

There are various reasons why your listed beneficiaries might not fit your current intentions. It can also prove costly because of circumstances beyond your control.

Outdated Beneficiaries

It is very common to have beneficiary names listed on policies and accounts that are not current to your wishes. The chances are you have beneficiaries listed right now that include a person you no longer wish to receive the benefit or it excludes someone.

Here are some examples:

  • Previous marriages: That is an easy one. However, please know that when you die the beneficiary on any legal document will receive the proceeds of that policy, account, or estate plan. I have had those phone calls from surviving spouses who discovered the ex on policies after their spouse died.
  • Not listing all your children:  You took out the insurance policy years ago before having that second or third child. 
  • Intentionally listing only one child: You figure that child will take care of their siblings. That mistake is widespread. However, the child you list has legal ownership. What if the child's spouse has different ideas? Or before making distributions to siblings, the beneficiary child dies. All the funds are now part of that child's estate. The funds could end up in the beneficiary child's divorce, lawsuit or creditors claim. Then there are possible gift taxes when making distributions depending on the tax code at the time.
  • Countless clients were in one of those or other situations as we reviewed their assets and policies during their Living Trust signing. Fortunately, they were still around to fix it.

Minor Children Beneficiaries

Suppose you have listed a minor as a primary or successor beneficiary on a policy or account. Unfortunately, you die before the minor reaches 18 years of age. If so:

  • If you die before the minor reaches age 18, all of the proceeds will go to Probate. The assets stay under the court's control until the minor is 18. 
  • Secondly, not many people want their children to receive large sums of money at 18; when Probate will release it all. 18 may be the age of majority; however it is rarely the age of maturity.

One of my favorite truths is that the human brain does not fully form until age 25. Everything is there except the frontal cortex, which governs reason. And that explains a lot! That fact should also inform your decision about the final distribution age of all funds. A Living Trust best accomplishes a sensible distribution strategy.

A Trust protects the funds outside of Probate. The minor can receive distributions before age 18 for health, education, and welfare at the discretion of your chosen Trustee. You chose the final distribution age.

Beneficiary Financial Troubles

No matter what age you feel is appropriate for your beneficiaries to receive their inheritance, there is no way of knowing whether they are going through a divorce, bankruptcy, or lawsuit at the time of your death.

If you name your Living Trust as beneficiary, the Trust protects against all of those risks. A Trust's Spendthrift Provision prevents any creditor or spouse from claiming the gift of your estate.

Benficiary Disability Issues

Suppose one of your beneficiaries acquires a disability through accident or illness before your death. In that case, your estate funds will go to the government for reimbursement of public benefits. Or your beneficiary will lose their SSI or Medicaid benefits.

You can prevent this from happening with a Living Trust that has precautionary Supplemental Needs provisions.

Living Trusts

At the end of your life, or at incapacitation if you have property or bank accounts in your name, they risk Probate.

  • A Will must be Probated. The rule is no one can legally sign your name. Therefore, all assets in your name are subject to the probate process, which averages 18 months and is costly.
  • A Living Trust completely avoids Probate.
  • Your financial accounts, life insurance policies, and deferred compensation accounts can name your Living Trust as beneficiary, subject to essential tax considerations.
  • A Living Trust estate plan includes both Health Care and Financial Power of Attorney documents. It also consists of a Last Will and Testament. A Will is necessary for guardianship of minor children. It also transfers assets in your name out of Probate.

Comprehensive Benefits of America

For an expanded presentation of asset protection and financial wellness strategies and to receive regular updates on strategies to protect what you have earned, visit and register with CBAPlan on the link below. Registration is free.

Visit www.cbaplan.com or call 1-312-559-8444 for assistance with registering.

Tom Tuohy is the founder and CEO of Comprehensive Benefits of America, LLC, and Tuohy Law Offices.

The information being provided is strictly as a courtesy. When you link to any of these websites provided herein, Comprehensive Benefits of America, LLC/ makes no representation of the completeness or accuracy of information provided at these sites. CBA does not provide professional financial, investment, tax, or legal advice. You should seek certified financial planners, CPAs, and attorneys for advice relative to your personal needs. See complete Disclosures and the CBA Security and Privacy policies.

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Oakbrook Terrace, IL 60181 
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