Simple Arkansas Estate Planning

Estate planning vehicles such as Wills and Trusts are necessary and useful options for many Arkansas residents.  However, there is a simple tool most people can put into place immediately:  having your bank and investment accounts designated “transfer upon death (TOD)” or “payable upon death (POD)”.

The term POD is generally associated with bank accounts (checking and savings), while TOD is more often used with investment vehicles (retirement, 401k, etc.)   These accounts are essentially joint accounts for which a beneficiary has been designated.  Upon the death of the account owner, the beneficiary acquires ownership.  In most cases, this will allow avoidance of probate.   Establishing a TOD/POD is simple, most financial institutions will have forms available.  When determining whether this option is best for you, however, there are several factors to consider:

• The transfer is revocable, therefore the account assets are not controlled by the beneficiary.  You retain control of your accounts.  Further, some protection may be offered against creditors of your beneficiary.
• These accounts may restrict the way you name your beneficiaries, however, and limit the number of parties you can list as beneficiary.  You are also restricted in your ability to name contingent or alternate beneficiaries. 
• As referenced on this blog in the Intestacy Law Section, a spouse has the right to receive an elective share of all property in the Estate, regardless of your designation.
• TOD/POD designations may not be consistent with your estate plan, since these designations are not subject to your Will or Trust.  Difficulties may ensue when only one Child is listed on the account, contrary to general testamentary provisions allowing for equal distributions to all Children.  An even larger problem exists if you have minor Children under the age of 18, since you will not want a minor as beneficiary. All of these issues are more properly addressed in a Will or Trust, which will also allow you to place restrictions on your gift (such as the requirement the Child reaches the age of 21, or graduates college).  

TOD/POD designations are a simple tool which may be attractive in limited circumstances.  As always, you should consult with an attorney or financial services professional to determine the best option for you and your family.