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Payable-on-Death Accounts: Beneficial Tools if Used Correctly
Payable-on-death (POD) accounts can be a quick, simple and inexpensive way to transfer assets outside of probate. They can be used for bank or credit union accounts, certificates of deposit and even brokerage accounts. Setting up such an account is as easy as providing the financial institution with a signed POD beneficiary designation form. Upon your death, your beneficiaries just need to present identification to the bank, with a certified copy of a death certificate, and the money or securities will be theirs.
Be aware that POD accounts can backfire unless they’ve been coordinated carefully with your estate plan. For example, suppose Jack divides his assets equally among his three children in his will. He also sets up a POD account leaving $50,000 to his oldest child. That creates a conflict that may have to be resolved in court.
Another potential problem with POD accounts is that if you use them for most of your assets, the remaining assets may be insufficient to pay debts, taxes or other expenses. One way to bypass this problem is to use a POD account to hold a modest amount of funds to pay for pressing needs while your estate is administered.
Avoid Misinformation About Tax-Favored Health Accounts
Do you have a health Flexible Spending Account, Health Savings Account or similar plan through your employer? The IRS is warning about misinformation that could lead to serious mistakes.
Nonmedical nutrition, wellness and exercise expenses that aren’t explicitly related to a medical diagnosis or treatment aren’t reimbursable under these plans. But that hasn’t stopped certain bad actors from offering to provide a “doctor’s note” (for a price) that they claim would authorize health reimbursement plans to accept ineligible expenses, such as for nonmedical food that doesn’t satisfy normal nutritional needs.
To review the IRS’s related FAQs: https://www.irs.gov/individuals/frequently-asked-questions-about-medical-expenses-related-to-nutrition-wellness-and-general-health
2024 Depreciation Limits for Business Vehicles
IRS guidance provides the 2024 depreciation limits for “luxury” business vehicles. For vehicles placed in service in 2024, depreciation limits (including first-year bonus depreciation) are $20,400 for year one, $19,800 for year two, $11,900 for year three and $7,160 for each year after that. This includes passenger cars, as well as SUVs, trucks and vans if their gross vehicle weight (GVW) is 6,000 pounds or less. The IRS also announced lease inclusion amounts for lessees of passenger vehicles first leased in 2024. To read Rev. Proc. 2024-13: https://www.irs.gov/pub/irs-drop/rp-24-13.pdf
Purchasing a heavier vehicle can offer tax advantages. New or used vehicles may be eligible for Sec. 179 expensing, which might allow you to deduct the entire cost. However, a reduced Sec. 179 limit ($30,500 for 2024) applies to vehicles (typically SUVs) with GVWs of more than 6,000 pounds but no more than 14,000 pounds.
Also keep in mind that, if a vehicle is used for both business and personal purposes, depreciation must be allocated between deductible business use and nondeductible personal use. The depreciation limit is reduced if the business use is less than 100%. If business use is 50% or less, you can’t claim any bonus depreciation or Sec. 179 expensing.
