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Could payable on death accounts benefit your estate plan?

Many Minnesota residents know that probating an estate can take a considerable amount of time. You may know this from firsthand experience closing a loved one's estate or from hearing others talk about the long process. As a result, you want to do what you can to help your family settle your estate more easily when the time comes.

One way you can help your probate case go more quickly is to avoid having certain assets go through the process. You may be able to transfer certain assets into trusts and remove them from your estate to avoid probate, and you may also be able to utilize payable on death accounts.

What are payable on death accounts?

Many financial accounts, like checking accounts and savings accounts, are payable on death. This means that you can name a beneficiary to the account, and that person will receive the funds in the account after your passing. Because you named a direct beneficiary, the assets do not have to go through probate because your named beneficiary can receive them. 

Of course, in order for a payable on death account to be effective, you must make a beneficiary designation. Some people choose to skip that step when first opening the account with the intention of naming a person later. However, if you do that and forget to name a beneficiary, the assets will have to go through probate. Additionally, it is important that you update your designations periodically. If a named beneficiary passes before you, the assets would go through probate to pass to an heir.

Does a beneficiary gain access to funds?

Some people may worry that if they name a beneficiary then that person can gain access to their funds whenever they want. Fortunately, that is not the case. The designated beneficiary can only obtain the assets after the account holder's passing and a death certificate has been provided to the financial institution holding the account.

If the idea of using payable on death accounts as part of your estate plan is new to you, you may want to gain more information on this option. An attorney can explain how these accounts and beneficiary designations could help keep assets out of probate and inform you what accounts may be payable on death. By utilizing this simple planning tool, you may avoid complications later.

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