Avoid the Uncertainty of Payable on Death Accounts; Avoid Probate; and Control When and How a Beneficiary Receives Their Inheritance

Payable Upon Death Accounts

Upon your death, the beneficiaries you named on a payable upon death (POD) account will receive the money in the account without having to go through probate. But what happens if one or more the beneficiaries predecease you? Who receives the share of the predeceased beneficiary on a payable upon death account?

The answer depends upon who the account names as the contingent beneficiary. For example, if you name two beneficiaries, and one beneficiary predeceases you, upon your death, the share of the predeceased beneficiary may pass:

If the amount in the payable upon death account is more than $5,000.00 and the beneficiary is a minor (a person under the age of eighteen) the money passing to a minor will have to go through probate and a conservator will be appointed for the minor until the minor attains the age of eighteen. When the minor attains the age of eighteen, they will receive the money in a lump sum.

Do you want an eighteen year old beneficiary to receive their inheritance in a lump sum?

Or, do you want to you want to establish terms and conditions regarding when and how they receive their inheritance?

Revocable Living Trust

You can name your Revocable Living Trust (and not a person) as the beneficiary of the account, and upon your death, the money in the account is paid into your Revocable Living Trust and does not go through probate. The beneficiaries you name in the trust will receive their share according to the terms and conditions of the trust. And, if one or more beneficiaries predeceases you, and you have named contingent beneficiaries, the contingent beneficiaries will receive the money without going through probate.

In your Revocable Living Trust, you can establish terms and conditions regarding when and how the beneficiary will receive their inheritance. For example, you may direct that the beneficiaries will receive their share of the trust as follows: One third at the age of twenty-five; one third at the age of thirty; and the balance at the age of thirty-five. Before the distributions to a beneficiary, you can give the Successor Trustee of your trust the discretion to use the beneficiary’s share of the trust for the beneficiary’s maintenance, support and education.

A properly drafted Revocable Living Trust can direct who will receive your property for both primary and contingent beneficiaries; avoid probate; and give you control regarding when and how a beneficiary will receive your property.