Adventures at the Bank

PART III - Payable on Death Designations

Many clients ask their bank to set up a procedure that will allow one of their children to help pay bills or take care of other things at the bank. While that should be a very simple arrangement, it often veers off course because the bank can offer a number of different options. When sorting through these choices many people are either confused or unaware of the consequences for the decisions they are making.

Requesting help with bill paying can lead to a discussion of your overall planning for the family. It is a short hop from talking about ways your children can help you now to discussing what you will do for your children after you die. This is especially true if bank personnel tell you they can solve all of your concerns with a few additional documents signed at the bank.

The best arrangement to allow one of your children to help pay your bills is a Financial Power of Attorney. The bank will probably abbreviate this as a “P.O.A.” When the conversation shifts to what happens after death, the bank may offer to help you avoid probate by using something called a “payable on death designation.” The bank abbreviates this a “P.O.D.” The fact that the abbreviations for these two very different tools are so similar causes endless confusion. With that confusion often comes mistakes and miscues.

The Financial Power of Attorney is a tool for managing your affairs during your lifetime. This includes paying bills if you are incapacitated by illness or if you just want to allow your children to take over the job of balancing the checkbook. The primary tool for deciding who inherits your assets and accounts after death is either a Will or Revocable Trust. When you start working with a bank you need to remember that your Will or Revocable Trust has all of answers to the questions regarding what happens after death.

It is always easier to keep the planning that you do for your lifetime separated from the planning you do for after death. If the bank wants to bring another option like a P.O.D. into the picture when you are looking to set up a Financial Power of Attorney, then you or the bank will need to coordinate that with your Will or Revocable Trust. That involves more work (see P.O.D. and T.O.D. Designations - What Are These Things?). The solution is to keep things separate. Don’t let your desire to have a P.O.A. let you drift into a discussion about a P.O.D.

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