We believe that a POD account can provide for contingent beneficiaries, if this intent is made clear in the account agreement with your customer. In general, the Illinois Trust and Payable on Death Accounts Act (“POD Act”) requires that POD accounts be equally distributed to beneficiaries on the death of the last surviving accountholder, but this general rule can be altered by using a customized account agreement to clearly memorialize your customer’s intent.

Even with such a written agreement in hand, there could be some remote risks for conflicting claims after your customer dies. Fortunately, the POD Act protects depository institutions from objections about POD account distributions in two ways. First, the POD Act permits banks to refuse to distribute a POD account until all beneficiaries have provided a “written direction” to the bank that accepts the bank’s proposed distributions. Second, if beneficiaries or putative beneficiaries make conflicting claims on a POD account’s funds, the POD Act permits your bank to “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.”

We recommend taking advantage of these protections when the account owner dies by requiring written directions accepting your proposed distributions from all of the then-living beneficiaries, and if any beneficiary or anyone else objects to or makes a conflicting claim on the proposed distributions, by also requiring a court order for the distributions from that account.

For resources related to our guidance, please see:

• Illinois Trust and Payable on Death Accounts Act,205 ILCS 625/4 (“If one or more persons opening or holding an account sign an agreement with the institution providing that on the death of the last surviving person designated as holder the account shall be paid to or held by one or more designated beneficiaries, the account, and any balance therein which exists from time to time, shall be held as a payment on death account and unless otherwise agreed in writing between the person or persons opening or holding the account and the institution: . . . (c) Upon the death of the last surviving holder of the account, the beneficiary designated to be the owner of the account . . . shall be the sole owner of the account, unless more than one beneficiary is so designated and then living or in existence, in which case those beneficiaries shall hold the account in equal shares as tenants in common with no right of survivorship as between those beneficiaries. If no beneficiary designated as the owner of the account on the death of the last surviving holder is then living or in existence, the proceeds shall vest in the estate of the last surviving holder of the account.”)

• 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. No institution, however, shall be required to distribute the account proceeds until the institution receives (i) legal evidence of death of all trustees or holders of the account, (ii) identification from each beneficiary then living, or business records evidencing the lawful existence and parties authorized to collect on behalf of each beneficiary not a natural person, and (iii) written direction from each beneficiary to close the account and distribute the proceeds in a form acceptable to the institution. If the institution, in its discretion, is unable to identify one or more beneficiaries, or cannot determine the lawful existence of any beneficiary, or cannot determine a party authorized to collect on behalf of any beneficiary, or 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.”)