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POD Accounts

A viable means of funding your own funeral

If you're funeral planning you may have run into a financing option referred to as POD. A Payable on Death Account is known as a POD account, and has several other names including Transferable on Death (TOD) and Totten Trust. A POD account is a very safe method of saving. It's a flexible plan and can be used to pay for your funeral or as a trust for your intended beneficiaries. In its most basic form a POD account allows you to name a beneficiary on your bank account or other assets like stocks, bonds and mutual funds.

POD Accounts: Pros and Cons

A POD account has some advantages over other beneficiary and funeral payment methods. The biggest may be that it's one of only a few vehicles that allow transfer of a decedent's property without probate. For example, if the decedent holds onto financial assets, such as stocks and bonds, these will very likely go through probate before being properly divided. This costs your beneficiaries both time and money. If you attach these assets to a POD account your beneficiaries will be able to avoid some of the more difficult and time consuming legal issues involved with estate settlement.

In addition, you can create several separate POD accounts, which allows you to leave separate amounts to different beneficiaries. You can include a specific account that is solely for funeral arrangements. With the average funeral running in the thousands of dollars, you'll also save your loved ones the stress and difficulty involved in financing a funeral.

With a POD account you'll also avoid some of the risks associated with other funeral planning payment plans like pre-need trust agreements and funeral pre-payment when you make a POD account for funeral arrangements.

A disadvantage of a POD account is that it may involve service fees. Interest earned on the POD account is also taxable. But one further advantage is that a POD account (unlike funeral pre-payment and pre-need accounts) may be canceled without penalty. This makes the account more flexible than other arrangements, as it can be tailored to your needs even if you're planning your funeral far in advance. 

Cautions

If you choose a POD account, you need to inform family members, the funeral home, your chosen executor and your lawyer of the account. Some legal experts also advise getting a POD account insured against bank failure. You can do this through the Federal Deposit Insurance Corporation (FDIC), which is an agency of the United States government. Overall, though, a POD account is a reliable and safe step in the funeral planning process.

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