Do I Need a Payable-on-Death Account in My Illinois Estate Plan?

 Posted on March 21, 2025 in Estate Planning

When you are ready to work on your estate plan, you might discover many options you never heard of before. Wills and trusts are important features that many people are aware of, but there are other ways you can plan for the future that might be relevant to you as well. One aspect of some Illinois estate plans that is less commonly known is called a payable-on-death (POD) account. 

This valuable tool allows you to transfer assets directly to named beneficiaries without going through probate. POD accounts can simplify the transfer of certain assets, and a qualified Illinois estate planning lawyer can explain their benefits, limitations, and potential impact on your broader estate plan.

What Is a Payable-on-Death Account?

A payable-on-death POD account is a financial account that allows the account holder to designate one or more beneficiaries who will receive the funds in that account when the holder dies. POD accounts can be checking, savings, or certificate of deposit (CD) accounts. The named beneficiary has no access to or control over the account until the holder’s death.

What Are the Benefits of POD Accounts?

POD accounts offer several advantages when they are included in an estate plan. First, they help your beneficiaries avoid probate. The assets in POD accounts can be transferred directly to the named beneficiaries, bypassing the probate process, so they can receive funds more quickly and efficiently. POD accounts also offer simplicity to the original account holder. The financial institutions where POD accounts are held provide straightforward forms for designating beneficiaries that are easy to use and update as circumstances change.

POD accounts are also cost-effective because by avoiding probate, the resulting legal fees and court costs associated with typical estate administration are reduced. Another benefit is that POD accounts are not subject to delays and can offer beneficiaries immediate access to the funds.

Potential Drawbacks and Risks of POD Accounts

While POD accounts offer several benefits, they also have potential drawbacks:

• Conflicts with the overall estate plan: Since POD accounts bypass instructions in a will or trust, they can create unintended conflicts. For example, if a POD account holds a significant portion of an estate's assets, it could lead to unequal distributions among heirs.

• Limited control: The account holder cannot impose conditions on how the beneficiaries use the funds. Once the money is transferred, the beneficiaries have full control over it and can use it however they see fit.

• Creditor claims: POD accounts bypass probate, but they are still subject to creditor claims and estate taxes in some cases.

• Issues with multiple beneficiaries: In some cases when there are multiple beneficiaries named, the financial institutions where the accounts are held require all of them to be present. If your beneficiaries live in different places and have different scheduling constraints, it could be challenging to find a time and place where they can all be available.

Consult with a DuPage County, IL Estate Planning Attorney

POD accounts can be useful tools for transferring funds directly and immediately to beneficiaries, but the potential drawbacks mean that they are not always the best option for everyone. A knowledgeable Lombard, IL estate planning lawyer with experience helping clients draft plans that suit their goals can explain the implications and help you understand your options. At A. Traub & Associates, we are passionate about providing the peace of mind that comes with making informed decisions that fulfill your wishes. Call us at 630-426-0196 to hear more about the services we offer.