Are Pay-On-Death Accounts Protected from Creditors After Your Death?

If other attorneys call me with questions I conclude that many laymen have the same question. A California attorney called today to inquire about his mother’s situation in Florida.

His mother owns an upside-down condo in Florida. She is elderly and ill. The mother’s biggest asset is a bank account which she titled in her name with a pay-on-death designation naming the attorney-son as death beneficiary. The son asked me if, in the event, the mother’s children do not continue paying the condo mortgage after her death could, the mortgage lender takes the money currently held in the mother’s bank account.

A creditor cannot likely get money from a pay on death account after the debtor dies.

It is highly unlikely that the mortgage lender would pursue a deficiency judgment against the mother after he death, but if it did I do not think they could recapture the money in the mother’s account.

After you die, your heirs or your creditors can open a probate estate to make sure your debts are paid from your non-exempt assets, which make up your probate estates. Assets that pass “by contract” or “by title”  to your heirs are not part of your probate estate because their title transfer is automatic upon death. The most common example is property owned jointly with rights of survivorship. Immediately upon death, the survivorship element of ownership kicks in and the asset transfers to the surviving joint tenant outside of any probate.

A pay-on-death bank account transfers automatically upon your death just as a jointly owned asset. The titling of the account with a pay-on-death designation ensures that the death beneficiary immediately gains title upon the owner’s death. Your estate and personal representative have no ownership interest in the account because your rights expire upon death. Therefore, to answer the attorney’s question, neither the mortgage company nor any other creditor could take the money the son acquires in the mother’s account to pay the mother’s debts after her death.