Should You Set Up a Payable on Death Account?

One of the most useful tools in planning your estate is creating a payable on death account, or POD. What is a POD? A POD account allows the account holder to control and access money while he or she is still alive and instruct money to be transferred to designated beneficiaries upon death. Similarly, most states have statutes that allow holders of assets, such as securities, bonds, or brokerage accounts to transfer to beneficiaries in the same way as a POD account allows for transfers of bank accounts. The beneficiary of a POD account receives the amount that remains in the account after the account holder’s death. This is an administratively simple and inexpensive method of avoiding the probate process.

A POD account provides certain advantages to the owner, including the following:

Ease of execution. A POD account can be created by filling out a form to notify the bank of the intention to make the account or certificate of deposit payable to a named person upon death. The account holder does not incur a fee. The bank and the beneficiary are responsible for distributing and collecting the funds after the account holder’s death.

Simple for beneficiaries to claim. To collect the funds, the beneficiary is simply required to present the bank with identification and a certified copy of the death certificate. No other documentation or paperwork is necessary.

No limit on fund amounts. There is no cap on the amount of money that can be placed in a POD account and subsequently assigned after death. This allows the account holder flexibility in allotting assets while planning the distribution of his or her estate.

Exclusive rights until death. While the account holder is alive, the beneficiary has no legal rights to the funds. This allows the account holder to amend the account at any time to retain control over the funds, name a different individual as beneficiary, or terminate the account.



Multiple beneficiaries. A POD account holder can name several beneficiaries and elect the manner in which funds are to be distributed. This is a prudent option in the event a beneficiary passes prior to the death of the account holder, which would otherwise result in the POD account passing through probate.  

Officers' and Directors' Fiduciary Duties

As a business owner, one of the important considerations in choosing a business structure is the scope and extent of your role in the management of the business. In a corporation, directors and officers have extensive obligations to the stockholders and to the corporation itself.  Known as fiduciary duties, these responsibilities include a duty of loyalty, a duty of care and, in many circumstances, a separate duty of good faith and fair dealing.

Fiduciary duties require that directors and officers, in their distinct roles within the corporation, make reasonable and well informed decisions that advance the interests of the corporation and its shareholders.

·        The duty of care obligates corporate directors to act as a reasonable person would in carrying out their tasks for the benefit of the corporation and its shareholders.

·        The duty of loyalty requires that officers and directors make decisions that are exclusively in the interests of the corporation and shareholders, rather than their own interests. This duty may be particularly compromised in transactions that reveal a conflict of interest, such as when an officer or director stands to benefit personally from the transaction.  Under a duty of loyalty, officers and directors are expected to make appropriate disclosures and potentially absolve themselves from a decision-making role, if necessary.

·        Lastly, the duty of good faith compels sincerity, trustworthiness, and honesty of intention to act in the best interests of the corporation.  This duty goes hand in hand with the other two duties in that officers and directors must exercise their duties of care and loyalty in good faith.

While the failure to properly exercise these duties can result in personal liability, the directors of a corporation are permitted to use their discretion to make corporate decisions and engage in reasonable risks so they long as their actions are adequately informed, in the best interests of the corporation, and undertaken in good faith. The “business judgement rule” is the principal avenue of protection available to directors under the governing law in California.  It creates a rebuttable presumption that the actions taken by directors are made in good faith and with reasonable care and knowledge.   

For stockholders, the above duties provide assurance that their ownership interests in the corporation will be given the utmost care by those chosen to manage the corporation.  For directors and officers, the above duties provide a framework under which they are expected to act, and gives directors wide discretion, so long as they act without conflicts and with a sincere intent to promote the best interests of the corporation.