IBA Compliance Connection

Your go to source for compliance!

One of our customers called us shortly before he died to change the payable on death (POD) beneficiary for an account from his mother to his wife. We told him that we accepted changes in beneficiaries only in writing. However, the customer died before submitting the written form to us, and his wife believes that she is the POD account beneficiary. Do we need to respect the customer’s verbal request to change the beneficiary?

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No, you are not required to honor your customer’s verbal request. Illinois law requires POD account beneficiary changes to be both made in writing and accepted by the bank. Because you did not receive a written instrument from the customer, Illinois law does not require you to change the POD account beneficiary.

Illinois law also provides that when there are conflicting claims to a POD account, a financial institution “may refuse to distribute the proceeds, without liability to any beneficiary or other party,” until a court determines who is the correct POD account beneficiary. You may wish to suggest that the customer’s wife file a claim for the account with the appropriate court; your institution could then hold the account funds without distributing them until you receive the court’s determination as to who should be treated as the POD account beneficiary.

For resources related to our guidance, please see:

  • Illinois Trust and Payable on Death Accounts Act, 205 ILCS 625/4(a) (“Any holder during his or her lifetime may change any of the designated beneficiaries . . . by a written instrument accepted by the [financial] institution.”)
  • Illinois Trust and Payable on Death Accounts Act, 205 ILCS 625/10 (“Upon the death of the last surviving trustee or holder of the account, the institution that maintains the account shall distribute the proceeds to the beneficiary or beneficiaries designated in the agreement controlling the account without further liability. . . . if conflicting claims to the account are made by the beneficiaries or other interested parties, then the institution may refuse to distribute the proceeds, without liability to any beneficiary or other party, until the institution receives a determination of ownership by a court of appropriate jurisdiction.”)