In estate planning, you may encounter terms like POD, TOD, and beneficiary. While they may seem different, they serve a similar purpose—to ensure certain assets pass directly to a designated person after your passing.
A POD (Payable on Death) and a TOD (Transfer on Death) are typically used by banks or credit unions for accounts such as checking, savings, or money market accounts. These designations allow the named individual to inherit the account’s assets without any need for probate.
The term beneficiary, on the other hand, is often used for other types of accounts or assets like life insurance policies, annuities, or investment accounts. Despite the difference in terminology, the effect is the same. These designations ensure the assets go directly to the named individual after the account holder’s passing.
One critical point to remember is that these designations override the instructions in your will or trust. If your will states that an asset should go to one person but the POD, TOD, or beneficiary designation lists someone else, the account designation will take precedence.
To avoid any issues or unintended consequences, it’s important to regularly review these designations and make sure they align with your overall estate plan. This small step can save your loved ones time and prevent confusion in the future.