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Simple English definitions for legal terms
pay-on-death bank account
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A quick definition of pay-on-death bank account:
A pay-on-death bank account is a type of bank account where the owner tells the bank to give the money in the account to a specific person when the owner dies. This is different from a joint account where both people can use the money while they are alive. The person who will get the money from the pay-on-death account cannot use the money until the owner of the account dies.A more thorough explanation:
A pay-on-death bank account is a type of bank account where the owner instructs the bank to distribute the account's balance to a beneficiary upon the owner's death. Unlike a joint-and-survivorship account, a pay-on-death account does not give the beneficiary access to the funds while the owner is alive.
For example, John has a pay-on-death bank account with a balance of $10,000. He designates his daughter, Jane, as the beneficiary. If John passes away, the bank will distribute the $10,000 to Jane without going through probate.
This type of account is useful for people who want to avoid probate and ensure that their assets go directly to their intended beneficiaries. It is important to keep the beneficiary designation up to date and to inform the beneficiary of the account's existence.