Topic: Payable on Death Accounts
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One of our customers has payable on death (POD) accounts that list her children as beneficiaries. She has requested that we add what her attorney calls a “right of representation” to the POD accounts. In other words, if one of her children predeceases her, she wants that parent’s POD account distribution to be given to her grandchildren per stirpes. Is that permitted? How would I title the accounts? (In this case, with a per stirpes distribution, if a named beneficiary predeceases the POD account owner, the customer wants the then-living descendants of that beneficiary to receive equal shares of that beneficiary’s share when the account owner dies.)
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We believe that a POD account can be distributed by “right of representation,” if this intent is made clear in the account agreement with your customer (beyond simply adding “by Right of Representation” to the account title). While this type of distribution for a POD account is unorthodox and could pose some remote risk to…
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We have a payable on death (POD) account that lists beneficiaries as well as designated amounts for each beneficiary to be provided on the accountholder’s death. The accountholder recently died. Is it possible for a POD account to designate specific amounts for each beneficiary? There are insufficient funds in the account to satisfy each of the designated amounts. Should we prorate each beneficiary’s share or split the account evenly among all beneficiaries?
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We recommend that you distribute the remaining account funds pro rata to approximate your deceased customer’s instructions as closely as possible. To protect your institution from possible objections by the beneficiaries (who will not be receiving the full amounts of their designated shares), we also recommend that you notify the beneficiaries of the bank’s intent…
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Can an account holder add a trust as a beneficiary to a regular checking or savings account in Illinois? How do we accomplish that?
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Yes, a trust may be added as a beneficiary to a checking or savings account. Under Illinois law, a savings or checking account holder may convert their traditional account into a “payable on death” account by signing an agreement with their bank providing that on the account holder’s death, the account shall be paid to…
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Two spouses co-own a money market account. Each spouse also has a lifetime revocable trust. They would like to name both trusts as the payable on death beneficiaries of the money market account. Is that permissible?
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Yes, Illinois law permits accountholders to select a trust as a beneficiary for a payable on death account, and it is possible to identify more than one beneficiary. For resources related to our guidance, please see: Illinois Trust and Payable on Death Accounts Act, 205 ILCS 625/2 (“‘Beneficiary’ includes a natural person who is living,…
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If a customer passed away, and we need to issue a cashier’s check to the executor of the customer’s estate or the beneficiary of the customer’s payable on death (POD) account, who should our bank list as the remitter on the check?
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While there is more than one way to clear out an account following the death of a customer, if you use a cashier’s check, we believe the best approach is to list the remitter as follows: Account #12345 of John Doe, deceased.
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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…
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An LLC wants to set up payable on death beneficiaries on its account. It is a sole-member LLC. Is that permissible?
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While Illinois law does not expressly prohibit this practice, we do not recommend permitting an LLC or other business entity to establish a POD account. The LLC will never trigger the POD provisions because LLCs do not die, even if all of the members of the LLC have died, which creates uncertainty for the bank…
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One of our customers died, leaving a savings account and a CD listing her daughter as the beneficiary. She also had an IRA listing another daughter as the beneficiary. All of the beneficiary designations use the daughters’ maiden names, but both daughters have since married. Now, their driver’s licenses show their married names, but their social security cards show their maiden names. If they present marriage certificates showing both their maiden names and married names, can we distribute the accounts to them?
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Yes, you may distribute the accounts once the beneficiaries provide their marriage certificates, although your institution has the right to withhold distributions until you are satisfied that they have provided adequate identification. We believe it is up to your institution to determine what constitutes adequate identification. Other than what is required by your account agreements,…
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When a customer passes that has a payable-on-death account at our bank, should we disburse the accounts to the listed beneficiaries? Or should we wait to receive letters of office?
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We believe it would be prudent to obtain legal evidence that the payable-on-death (P.O.D.) account owner or trustee has died before you disburse the account proceeds. The Illinois law governing P.O.D. accounts does not appear to require such documentation, but it does include permissive language that grants financial institutions the discretion to wait before distributing…