Naming Minor Kids as POD Beneficiaries in Texas: Why You Should Think Twice

Do not name your minor children outright as beneficiaries of your bank accounts without understanding the consequences. In Texas, a payable on death or transfer on death designation can create a costly legal process when the person inheriting the money is a child.

You want to provide for your kids. But naming them on an account is not the same as putting a plan in place for how they will receive and manage that money.

The Problem With POD and TOD Designations for Minors

Payable on death, commonly called POD, and transfer on death, commonly called TOD, designations identify who should receive an account after the account holder dies. The concern here is naming a minor child directly as that recipient.

It is not that children cannot inherit money. The problem is that leaving money outright to a minor through these designations can require a guardianship of the estate proceeding to handle the inheritance.

That distinction matters. Your child may be entitled to the money, but receiving and managing it is not as straightforward as it would be for an adult beneficiary. A guardianship proceeding can be lengthy and expensive, adding a legal burden to what you intended to be a simple transfer.

Consider Leaving the Money in Trust Instead

You can provide for your children without leaving the money to them outright. One option is to put the money in trust for their benefit.

The important step is to speak with an estate planning attorney about how to arrange this properly. Do not assume that adding your child’s name to a bank beneficiary form accomplishes the same thing as creating a trust-based plan.

For Indian-American families planning their estates in Texas, the practical question is not just, “Who should inherit this account?” It is also, “How will that inheritance be handled if my child is still a minor?”

Review Your Bank Account Beneficiaries

Before relying on a POD or TOD designation, take these steps:

• Check whom you have named.

  Look for any accounts that list a minor child as a direct beneficiary.

• Understand the potential consequence.

  An outright inheritance may require a guardianship of the estate proceeding, with the time and expense that entails.

• Discuss a trust with an estate planning attorney.

  Get guidance on how to leave money for your children rather than simply leaving it directly to them.

The goal is to provide for your children without unintentionally creating a long, expensive process. Plan how the money will reach them, not just whose name appears on the account.

This information is for general informational purposes only and does not constitute legal advice.