I thought I remembered seeing this topic before, but couldn't find any posts.

Can a Sole Proprietor name a beneficiary on a business account?

We found an account set up as:

John Smith, DBA Smith's Bait Shop
POD

I didn't think that was correct...

Thanks!

The dba does not exist except on paper, the money is the individual's.

So - you're saying it's okay to have a beneficiary named on that account? Would the FDIC recognize it as such?

The naming of beneficiaries are governed under State law. The FDIC has rules regarding insurance coverage that address how insurance is calculated, not whether such designations are legal at the State level.

I'm sorry - I'm not following your responses, and maybe my questions were clear.

I wasn't asking if the FDIC regulated the naming of the beneficiary, I was wondering what category this might fall into for their calculations. Am I remembering correctly that a solely owned business would fall into the "individual" category? If that's the case, I would think naming a beneficiary would be acceptable and figure into their calculations with other individually owned accounts for this same person.

I'll see if I can find information in the State of MI statutes for beneficiaries.

FDIC Ownership Categories
Single Accounts
A single account is a deposit account owned by one person. This ownership category includes:

•An account held in the name of a business that is a sole proprietorship (for example, a “Doing Business As” or DBA account)

Just to be clear: as long as state statute allows for beneficiaries on a sole proprietorship account, we should be good to go. Is that what you're saying?

That about sums it up.

Got it - thanks.

I'm back - and having difficulty locating where, in the state statutes, one might find information relating to beneficiaries. I even contacted the State, and they referred me back to my bank's legal department.

Suggestions?

The key terms in "uniform" laws are "multiple party account" and "multiple person account." I scanned Michigan statutes for each and got a hit on the former, but it seemingly only applies to credit unions. Some states hide these provisions very cleverly; in Texas they are in the Probate Code.

Presumably the MiBA does new accounts training, the materials from one of those programs should take you where you want to go.

P.S. Even if state law allows naming a POD on a sole proprietorship, it may not be a particularly good idea. I've seen it done where it was a going buisness with several employees. The owner died and suddenly the business doesn't have a dime to meet payroll, pay the bills or anything else. The business was to be operated by the decedent's estate and sold to the son, but every dime in the bank account had gone instantly to the POD beneficiary, the surviving spouse. (The decedent probably forgot he had done it, but he certainly did not mention it to the attorney who helped plan his estate.)

Doing what they want isn't necessarily doing them a favor.

Thanks, Ken! This has been very helpful.

Ken,

Does KY allow sole proprietorship to name a POD on an account?