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

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A pay-as-you-go account does not help while you are alive.

Important points

• A payable-on-death account is a type of bank account with a named beneficiary.
• It can protect someone’s family after the account holder dies, but it does not help while they are alive.
• Orman believes people should have a living revocable trust, which can be used before and after death.

Financial expert Suze Orman discusses a wide range of financial topics on her popular Women & Money podcast. In a recent episode, she answered a call from a caller about pay-as-you-go (POD) bills and how to ensure your estate is distributed to your beneficiaries. Instead of a POD account, Orman advised people to use a live revocable trust. Here’s why.

What is a pay-as-you-go account?

A POD account is a type of bank account with a named beneficiary. Appointing a beneficiary is free and allows you to transfer your bank accounts to whomever 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 check, savings, money market or deposit account.

POD accounts can help ensure that beneficiaries receive their inheritance without going through probation. Trial 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 to someone’s death to avoid probate.

Is a POD account enough?

According to Orman, POD bills and wills are great, but only after you die. This means that people you add as PODs to your bank accounts cannot manage or use the funds while you are alive, even if you are incompetent. However, a living revocable trust can be useful 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 explains how your assets will be split at your death.

Because this is revocable, you can make changes to your trust whenever you want. As the giver (the person who created the trust), you have control over your assets while you live. 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 as soon as you die.

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