Episode #96: "POD vs TOD vs Beneficiary Designations Demystified: Choosing the Right Path for Your Legacy"

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Transcript

Introduction to Fiscal Physical Podcast

Speaker 1 0:01

Welcome to the Fiscal Physical Podcast. Join us each week as we sit down with the founder of Alchemy Wealth Management and author of your Fiscal Physical, Ryan Nelson. Tune in to gain valuable insights and practical tips as we simplify complex financial concepts into digestible lessons. From budgeting to retirement planning, this podcast is your go-to resource for mastering financial literacy.

Aaron Hoisington 0:33

Welcome everybody to this week's episode of the Fiscal Physical Podcast. My name is Aaron Hoisington. I am here, as always, with Mr Ryan Nelson, founder of Alchemy Wealth Management, one of my good pals. Published author. The accolades go on and on, ryan. How are you today, man?

Ryan Nelson 0:50

Doing pretty darn well. Yeah, it's a beautiful day out there. No complaints on my end.

Aaron Hoisington 0:54

I love it. I love to hear that. Same with me, man. It's a glorious day to be alive, I suppose Well, for the most people there. But that kind of feeds in relatively nicely to our conversation. For today we are going to be talking about some fun acronyms. When I was putting this together, we haven't had an episode where we really threw out a lot of acronyms recently, but we're going to be talking about POD and TOD today, and then beneficiary designation as well. So lots of things there. Hopefully you can break these down Payable on death, transfer on death, beneficiary designations A lot of big words in there, ryan, but I'll turn it over to you, man, to kind of talk about those, why they're important, differences and just all the good stuff related to them.

Ryan Nelson 1:42

Perfect, let's do it so. Yeah, so we'll compare POD, TODs and beneficiary designations. I love that you call them pods and tods.

Ryan Nelson 1:51

I don't know that I've ever heard that vernacular before, but I love it. But so each of these three different designations are all designed to basically designate who you want your money or your account or your assets to go to if something were to happen to you and you were to pass away. So let's talk about how all three of these are similar. So all three bypass probate and provide a direct transfer of assets. They also allow you, the owner, to control during your lifetime who would receive those assets, and there can be some cost-effective and simple estate planning tools. So if you're again trying to dictate who will inherit your estate after you leave, these would be very cost-efficient ways to dictate where some of your assets go. So now let's talk about each one individually.

Ryan Nelson 2:39

So PODs are payable on death. That's commonly going to be used for bank accounts. So, like checking accounts, savings accounts, cds, stuff like that, you would name someone to receive the account balance and then it would avoid probate, but it would only cover that specific account. So if you have a checking account, you'd set somebody up as the payable on death or the POD on that account. If anything happens to you, you the account would go to whoever you've named as the beneficiary, as the whoever you've set up as payable on death, and then they would receive those and it would skip probate. But the person you name on there wouldn't have any rights to the funds until you pass away, okay quick.

Aaron Hoisington 3:18

Sorry, just interjected. Do you set that up at the bank? Is that? That's a pretty common form? You can just like get at bank right Yep absolutely. You don't need specifically. You probably just need to be notarized, I'm guessing. So that's the benefit, not a lawyer, but yeah, yeah.

Ryan Nelson 3:30

So that's the benefit behind all these you don't have to go hire an estate planning attorney to create these documents, it's just documentation, right. So you could go to the bank, ask for their POD form for your checking account or whatever. And so very similar to that is a TOD transfer on death. The difference is this is going to be more common for investment accounts, so brokerage accounts, sometimes real estate, so we can think of POD more for your bank, your checking account, savings account, cds. Tod is going to be more specific to your investment accounts, but it's going to act in a very similar way, so it's going to transfer those securities or property directly to the person you've named. Again, it skips probate, so it's an efficient way and you, as the owner of the account, can have complete control over this as you're still alive.

Ryan Nelson 4:15

And then the last of the three is the beneficiary designations. So that's going to be used on 401ks, iras, roth IRAs, sometimes life insurance policies, and so again, that's where you would name your beneficiary. So if anything was to happen to you, your beneficiaries who would take over the account. You can also set up contingent beneficiaries, so if something were to happen to the primary beneficiary, a contingent beneficiary would take over and this would override anything you have like in a will, let's say.

Ryan Nelson 4:44

So, one kind of you know shortcomings sometimes, you see, with this is maybe there'll be you know a spouse, spouses that get separate, that separate, they get a divorce and they still had a beneficiary set up from their old marriage. They go create a will and trust with their new marriage and they think, oh, this will will make sure my assets go to my new spouse. But if they still had the beneficiary designation identified as the old spouse, that would override the will or anything like that, and the old spouse would get the assets. So it's important that, as you set these things up, that you maintain them and make sure they're up to date with your current goals. But again, it's again a very simple tool that you can use to help with some of that estate planning.

Aaron Hoisington 5:31

Very simple tool that you can use to help with some of that estate planning. So that's awesome. I mean, it's so interesting to think about. I mean, before we started doing this, but actually before I read your book, I never really thought about estate planning just in general and really what goes into it. And just like thinking about these okay, like getting a POD, a TOD, a beneficiary designation. I was talking to my wife the other day. Um, she actually was the one who sent me like an instagram video on this. She's like, okay, what is she's like? Do you think? Because the person sent the video, it was fine, but it wasn't like. I was like I wonder what ryan would say on this. She's like you guys should do an episode.

Aaron Hoisington 6:03

I was like perfect and uh, uh, just to think about like, just at least doing the bare minimum. I'm always like, hey, make sure you at least get things, make things as easy as possible for people that you can do, like if you, hypothetically you're going to pass, because no one knows when you're going to pass, and so you think about, as you get older, oh, as I might get into dying age, if you will like, making sure these things are done. But we could all any, any of us could really die right day. So, getting these and getting these in place and then, like you mentioned, the big piece of keeping them updated, yep, huge. I'm sure many uh, there's been many an unhappy partner like one day when they're like, oh my gosh, this pod or tod that I had like 40 years ago, I just didn't update it, and now, like, somebody else gets all my money or whatever too. So, yeah, very, very important, to say the least.

Ryan Nelson 6:51

Yeah, and so they're free and simple to set up. So, yeah, it's important to set up and then, like you said, maintain them. So just as a summary, so they're very similar. Oftentimes you'll hear people sort of refer to all of these as beneficiaries. It's not technically accurate. Like again, beneficiary refers to 401ks, iras, roth IRAs, insurance Transfer of death is going to refer to your other investment accounts and payable on death is going to typically refer to your banking accounts. But in essence, they're going to be very, very similar in accomplishing a very similar goal. And so I'd say, in summary, they're going to help prevent delays, confusion and unnecessary court costs so you can avoid going to probate and send the money exactly where you want it to go and then you can ensure the assets pass quickly and directly to the people you want. And it keeps your estate plan aligned and simple and it kind of aligns your goals across all of your accounts.

Aaron Hoisington 7:45

Sure, that makes perfect sense. I'm just curious in your line of work, how often do you see, I guess, like issues come up with these Like I don't know if you're like, oh cool, like somebody who's like, oh, I got this inheritance that's coming, or whatever, and then it's like, oh, actually it's going to be tied up in probate for like years, or something like that. Like I don't know if it comes up very often with like your, your clients.

Ryan Nelson 8:07

Definitely I mean probate. I mean a lot of people have to deal with probate and probates like notoriously a pain in the butt Um. So definitely there's a lot of um. You know. You see fairly commonly um assets going through probate. That creates headaches Um, whereas if if a little bit of estate planning was done on the front end, they could have maybe avoided some of those. So that's pretty common for sure. Um Is that your question.

Aaron Hoisington 8:32

Yeah, absolutely yeah. Yeah, I'm just curious. We talk about it and I don't actually have any personal experience with seeing probate play out or anything like that too. So I know that, like I mentioned when I read your book, that was the first I've heard of wills and probates that you've thrown around or whatever, but I didn't really know the process of them. So it's great to kind of think about doing these simple and free things. You can really set up your you know you're not setting up yourself really, or could be, I don't know Like, but if you or your partner was to pass away like, it's a, it's a great thing to have in place, to say the least, absolutely Awesome. Anything else you want to add on this one here, ryan, I think you did a great job breaking that down, but I'm not sure if there's anything else.

Ryan Nelson 9:12

I think that's a great start to it.

Aaron Hoisington 9:14

Awesome, appreciate it, man. We will go ahead and pause here real quick. We'll be back on the other side of this and everybody hang tight and now to put the personal in personal finance.

Aaron Hoisington 9:28

Welcome back everybody to this side of the Fiscal Physical Podcast. I am still here with Ryan. We just spoke about PODs, tods, beneficiary designations and now let's pivot a little bit. Ryan, are you ready to pivot? Let's do it. I mean like one food specifically, not like, hey, he's going to cook me breakfast, lunch or dinner, or he or she cooking me breakfast, lunch or dinner. But if you just had one meal every day prepared by a chef, what would you?

Ryan Nelson 10:02

what would that be for you. Yeah, I was going to say breakfast. Uh, yeah, I still think it would be probably a breakfast food. It'd be awesome to. Either way, the concept still applies Like it'd be nice to just like have a meal ready for you when you get up, save time in the morning and stuff, um. But yeah, I would probably go with like, uh, probably like some sort of uh, egg scramble breakfast, um, with some sort of breakfast meats there, um, yeah, so I think that's what I would do. I'd love to just save you the time, the energy. I think it would be pretty awesome.

Aaron Hoisington 10:28

Get you off to a good get your day off to a good start. What about you? I like it. Yeah, that's it. I was waffling between a breakfast food or a dinner food, because I'm in the same boat. Like when I get out of bed, you know, I'm like, oh man, like I feel like my energy level is sure a little bit lower till I actually start waking up, and then by that time, like, okay, you know is it is, do I really it's? You know it's nine, nine am right wait till lunch, like kind of thing too.

Aaron Hoisington 10:51

But um, I I like this uh question because I I always use this uh answer. When somebody asks this question or similar ones, I always say I'd like them to cook me a pizza every single day, like I think, if you could because you could make a pizza, anything you could have a breakfast pizza dessert, pizza dessert, exactly right, absolutely so having having a somebody cook me a pizza every day, and I think I'd really be able to, um, you know, experiment with pizza and such to my wife and I we make pizza once a week, um, it's just delicious, like.

Aaron Hoisington 11:25

So just have being able to try different things and such. I think that'd be, uh, probably where my mind would go, but I guess I could use it for any meal overall.

Ryan Nelson 11:32

So yeah, I was thinking pizza as, but I would just get so fat.

Speaker 1 11:35

Yeah.

Ryan Nelson 11:36

Uh, interesting though, if you play off of that pizza concept, what about burritos? You could do breakfast burritos, dinner burritos, lunch burritos.

Aaron Hoisington 11:43

I was thinking about that. So most, I think, like every burrito you know, has its staple. You know you, you have your, your tortilla or whatever vessel you use to wrap it in, and then you got got ingredients inside of it. It's just like a pizza rolled up, if you will. It's true, true, true. I do think either one of those would probably be a good option to have. So it could do anyone. We could get around the skirt the lines with that there. So I want to pose that out to the listeners. Really would be curious to hear what you guys would want a professional chef to cook you one meal a day and let us know. Also, let us know if you guys have any questions, things you want us to cover. We'd love to do that there. And other than that, ryan, I'll leave you here to play us out, my man.

Ryan Nelson 12:27

As always, stay the course.

Speaker 1 12:31

Thank you for joining us for the F physical podcast. Until next time, happy listening and, as always, stay the course. If you have a question or topic suggestions, please email us at podcast at alchemy wealthcom. If you enjoyed today's discussion, subscribe to the podcast to ensure you never miss an episode, and consider leaving us a rating and review on your favorite platform. This helps other listeners like you find the show. For more resources, you can visit Alchemy Wealth Management's website at wwwalchemywealthcom or find your fiscal physical the book on Amazon. We'd be remiss if we didn't mention that personal finance is just that personal.

Speaker 1 13:13

Please don't take anything we say as advice. The preceding content is for informational and entertainment purposes only. It's not an offer or a solicitation, nor should it be construed or relied upon for tax, legal or investment advice. It doesn't consider your personal financial situation or objectives and may not be suitable for you.