What Suze Orman Says About a Payable-on-Death Account

A payable-on-death account does no good while you're alive. 

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

What Is payable-on-death account?

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 create this account at a bank or credit union. You can also convert an existing bank account into a POD account. A POD account can be a checking, savings, money market, or certificate of deposit account.

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

Is a POD account enough?

According to Orman, POD accounts and wills are great, but only after you pass away. This means that people you add as POD on your bank accounts can't manage or use the funds while you are alive, even if you are incapacitated. A living revocable trust, however, can be of use 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 lays out 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 grantor (the person who created the trust), you have control over your assets while you are alive. And you can choose someone to be the trustee and manage your trust after you die. The beneficiary of your trust will receive the assets of your trust once you pass away. 

That's why Orman recommends you have a will and a living revocable trust. If you become sick or incapacitated, a POD account will not help you. On the other hand, a living revocable trust can dictate where your assets go after you die, plus it can protect you while you are alive, which may give you the peace of mind you and your loved ones are looking for.