We have a customer with a power of attorney over his father’s individual checking account. The account is not a payable on death (POD), but the son would like to convert it to one. We have a copy of the father’s will, which indicates that his four children will receive his estate in equal shares. Can we allow the son with power of attorney to add POD beneficiaries to his father’s account? If so, do we need to require that he add all four children, in light of the will’s directives?

The answer depends on the specific language in the power of attorney document. Generally, an agent acting under a power of attorney does not have the authority to add or change account beneficiaries without an express grant of authority to do so (which would be identified in Section 3 of the statutory short form power of attorney document, which is for granting “other delegable powers including, without limitation, power to . . . name or change beneficiaries”). Consequently, whether the son may convert the existing account to a POD account depends on whether his power of attorney specifically bestows that authority.

If the son’s power of attorney does not grant specific authority to name or change beneficiaries, we do not believe that he has the authority to establish a POD account, even if all four children named as equal beneficiaries in the will are named as the beneficiaries of the POD account.

Generally, under the POD Act, if a beneficiary predeceases the POD account owner, the account funds are divided equally among the remaining living beneficiaries after the account owner’s death. However, under the Probate Act, if a beneficiary predeceases the testator, the predeceased beneficiary’s shares default to his or her descendants, and not to the other living beneficiaries. Consequently, converting a standard deposit account to a POD account could be considered to be “changing beneficiaries” in a situation like this one.

If the son’s power of attorney does grant specific authority to “name or change beneficiaries,” however, we see no special issues regarding his converting the account to a new POD account.

In any event, you should note that the POD Act protects depository institutions from potential objections over 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.” If you have any doubts about this or any other POD account down the road, we would recommend following these procedures.

For resources related to our guidance, please see:

Illinois Power of Attorney Act,755 ILCS 45/3-3(d)(3) (“In addition to the powers granted above, I grant my agent the following powers: (NOTE: Here you may add any other delegable powers including, without limitation, power to make gifts, exercise powers of appointment, name or change beneficiaries or joint tenants or revoke or amend any trust specifically referred to below.”)

Illinois Power of Attorney Act,755 ILCS 45/3-4 (“[T]he agent will not have power under any of the statutory categories (a) through (o) to make gifts of the principal's property, to exercise powers to appoint to others or to change any beneficiary whom the principal has designated to take the principal’s interests at death under any will, trust, joint tenancy, beneficiary form or contractual arrangement.”)

Illinois Trust and Payable on Death Accounts Act, 205 ILCS 625/4 (“(c) Upon the death of the last surviving holder of the account, the beneficiary designated to be the owner of the account (i) who is then living . . . 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. . . .”)

Illinois Probate Act, 755 ILCS 5/4-11 (“Unless the testator expressly provides otherwise in his will, (a) if a legacy of a present or future interest is to a descendant of the testator who dies before or after the testator, the descendants of the legatee living when the legacy is to take effect in possession or enjoyment, take per stirpes the estate so bequeathed . . .”)

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.”)