If a loved one has named you as beneficiary of a Payable on Death (POD) bank or investment account, you won’t have to wait until his or her estate is probated in order to receive the funds in that account. When the owner of the account passes away, you as beneficiary will simply need to present the owner’s death certificate to the appropriate financial institution and fill out any required forms. Once this is done, the funds in the account will be handed over to you.
Since you, as beneficiary, have no access to or ownership of funds in a POD account during the account holder’s lifetime, you won’t owe income taxes on the account funds when you inherit them. However, if the account holder owes estate taxes, then you might have to contribute a portion of your inherited funds toward the estate tax bill. Whether or not you’re required to do this will be determined by the terms of the account holder’s Will or Living Trust, and the attorney assisting with the administration of the estate will let you know what steps you need to take.
What about the account holders other final bills and debts? Unless you co-signed for a specific debt, you won’t have an obligation to pay off any bills or debts.
If you have questions about your rights or responsibilities concerning a Payable on Death account, a qualified estate planning attorney can help you.
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