What Suze Orman says about a payable on death account

A payable on death account is useless as long as you are alive.

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Key points

• A payable on death account is a type of bank account with a named beneficiary.
• This may protect someone’s family after the account holder dies, but it doesn’t help as long as they’re alive.
• Orman thinks people should have a revocable living trust, which can be used before and after death.

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Financial expert Suze Orman covers a wide range of financial topics on her popular women and money podcast. In a recent episode, she answered a caller’s question about accounts payable on death (POD) and how to ensure your estate is distributed to your beneficiaries. Instead of a POD account, Orman recommended people use a revocable living trust. Here’s why.

What is an account payable on death?

A POD account is a type of bank account with a named beneficiary. Designating a beneficiary is free and allows you to transfer your bank accounts to whoever you want. You can set up this account at a bank or credit union. You can also convert an existing bank account to a POD account. A POD account can be a checking, savings, money market or certificate of deposit account.

POD accounts can help ensure that beneficiaries receive their inheritance without probate. Probate can be a long process where the courts determine who gets what after a person dies. POD accounts, wills and trusts are ways to streamline the process of transferring assets after someone dies to avoid probate.

Is a POD account sufficient?

According to Orman, POD accounts and wills are great, but only after you die. This means that people you add as PODs to your bank accounts cannot manage or use the funds while you are alive, even if you are incapacitated. A revocable living trust, however, can be useful to you while you are still alive. A revocable trust is a legal document that explains how your assets will be managed if you are unable to do so yourself. It also specifies how your assets will be distributed upon your death.

Because it is revocable, you can make changes to your trust whenever you want. As the settlor (the person who created the trust), you control your assets during your lifetime. And you can choose someone to be the trustee and manage your trust after your death. The beneficiary of your trust will receive the assets of your trust upon your death.

This is why Orman recommends that you make a will and a revocable living trust. If you become ill or incapacitated, a POD account will not help you. On the other hand, a revocable inter vivos trust can dictate the destination of your assets after your death, more it can protect you while you are alive, which can give you the peace of mind you and your loved ones are looking for.