Avoid Probate

• One of the advantages of setting up a bank account with your grandchild as the beneficiary is that your grandchild can avoid probate. When you pass away with a normal bank account, the money is added to your estate and must go through probate before it can be distributed. With a payable-on-death account, you get to name a beneficiary and the money goes directly to him when you pass away. This gets the money to your beneficiaries faster and with less confusion.
  
  

Convenience

• Another benefit of using this option is that it is convenient. Instead of having to create a will or a trust, you simply name the beneficiary of the account. Typically, the bank simply allows you to fill out a single piece of paper to identify the beneficiary you want to inherit the money. Once you fill out the information about the beneficiary, the bank will then seek out the beneficiary and pay him when you pass away.
  
  

Retain Control

• Another advantage of setting up a bank account with your grandchild as the beneficiary is that you get to retain control of the money up until your death. By comparison, if you were to set up a joint bank account with your grandchild, the money would be jointly owned by the grandchild while you are still alive. The child could waste the money and you would not have any inheritance to leave him when you die.
  
  

Avoid Creditor Problems

• When you use a payable-on-death account instead of a joint bank account, you also do not have to worry about creditors of your grandchild taking the money. If you used a joint bank account and included your grandchild as a joint owner, creditors could potentially claim the assets in the account. This is true even if your grandchild did not contribute any of the money to the account. If he is just a beneficiary and not an owner, creditors cannot take the money out of the account.