14 Mar Is putting money in a payable-on-death account a good idea?

Q. My 97-year-old mom just sold her house and now lives with us. She wants to put money in three accounts in her name and with each of her three children, payable-on-death (POD). Is this a good idea? Would it be considered a gift? If it’s not needed for health care, would that money go directly to the other person on the account when she passes?
— Planning ahead

A. We’re glad you’re asking the question.

It would be smart for your mom to understand all the consequences of any moves before she takes action.

Putting money into three separate pay-on-death accounts with each sibling would avoid probate for those assets, said Tom Szieber, a trusts and estates attorney at Chiesa Shahinian & Giantomasi in West Orange

But, he said, whether probate would be avoided altogether depends on whether your mother has other assets that are not either held jointly or include a beneficiary or POD designation.

“Putting the money into POD accounts would not be considered a gift, since the questioner’s mother would retain full control and ownership of the assets,” he said. “If she wished, she could spend or transfer such assets to anyone at any time.”

Whether the money would pass to the POD beneficiary would not depend on whether it was “needed for healthcare” specifically, but whether some or all of the money remained in the account at the time of your mom’s death, Szieber said. If it is, then the money would pass to the POD beneficiary as long as the beneficiary had not been removed from the account, he said.

On whether putting the money into POD accounts is a “good idea,” it depends on your mother’s planning goals and considerations, he said.

“The questioner’s mother should seek counsel with an experienced estate planning attorney to decide on the best course of action, as putting assets in trust may provide greater protections than simply utilizing POD accounts,” he said.

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This story was originally published on March 14, 2022.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.