Being the very conservative bank that we are, we decided several years ago not to offer any type of POD accounts. However, recently the decision has been reversed and we anticipate that many of our CD customers will want to change the titling of their CDs to reflect a POD. My question is whether to issue a new CD or modify the existing one. We have always reissued a new CD if the customer wanted to make any kind of titling change in the past. But now the question has come up as to whether this is really necessary. Any thoughts would be appreciated.

cwilliams: I think part of your answer will depend upon your rules and regulations for CDs and any other contract you have w/your customer. What does it say about re-titling an account?

I know that some banks wont treat designating a POD beneficiary as a re-titling because the same customer still owns the account (ie. its not like adding a joint owner where an account presently held in the name of "A" is changed to being owned by "A" and "B"). The POD beneficiary only comes into play when the customer dies. Until that time, the account title (and ownership) doesnt change.

Other banks take (as you mentioned ) a more conservative approach and treat the designation as a change in the account title because, when the customer dies, the account title will change at that time.

In my opinion, the better choice is not to treat it as a re-titling because the POD beneficiary's "ownership" of the account is contingent on 2 future events: (1) the customer dies AND (2) the customer didnt change or revoke the POD designation before his/her death.

I think adding the designation to the account signature card will suffice and a re-issue of the CD instrument isnt necessary.

P.S. Be prepared for customers that own a CD jointly who also want to designate a POD beneficiary. They dont realize that designation of a POD beneficiary is incompatible with joint ownership and cant be done.

I AM NOT ENGAGED IN PROVIDING LEGAL ADVICE AND THE VIEWS EXPRESSED ARE NOT THOSE OF MY EMPLOYER

jeffp,

Thanks for your comments and insight. I agree that if we are just adding a POD beneficiary, we probably wouldn't need to reissue the CD. What about a situation with, say, a mom and her adult daughter who are co-owners and mom wants to change the daughter to the POD beneficiary? Daughter is no longer an owner, so wouldn't we be safer in reissuing in a case like this?

Also I attended a seminar last week regarding this subject and was told you can have multiple owners and multiple POD beneficiaries on an account. Could this vary from state to state?

Thanks!

cwilliams: I definitely agree.

If mom wants to change daughter's status from joint owner (ie. daughter can w/draw from the acct now [subject to any reqrment for all signatures while the CD isnt in maturity]) to POD (ie. daughter cant w/draw until mom has died), then I view this as a change not just in the title of the acct, but also a change in the ownership of the acct. I would re-issue the CD instrument.
As to your last point, I agree if what you were told is that the owner of an individual acct can designate more than 1 POD beneficiary. If you were told that 1 or more of the joint owners can also name a POD beneficiary, I disagree and doubt that state law would permit this. Here's why.

In order to create a valid joint acct, the parties have to create their interest in the acct at the same time. If a joint owner designates a POD beneficiary, the surviving joint owner and the POD beneficiary receive their interests in the acct at different times (the surviving owner at the time the acct is titled as joint and the POD beneficiary at the time the other owner dies).

I dont know of any state law that would permit a joint acct w/a POD beneficiary, w/1 exception.

I have assumed that the acct is held as joint tenants w/right of survivorship. You could also have an acct held jointly as tenants in common (I think this is, by and large, unusual for deposit accts, but it is certainly possible and happens all the time w/real estate). If an acct is held as tenants in common (ie. if there are 2 owners each owns 50%; 3 owners 33 1/3%, etc.), I think state law would permit a joint owner to designate a POD beneficiary as to the portion of the acct (ie. 50%, 33 1/3%, etc.) that the owner owns.

In a joint tenants w/right of survivorship acct, each owner owns all of the acct at the same time. This is why a POD beneficiary designation is incompatible with joint ownership (because, upon death, the surviving owner gets what she always had, all of the acct and there's no interest of the deceased owner to give to the POD beneficiary).

Sorry for the length of this post [I wanted to try and be thorough] and my delay in responding (very busy the last 2 days].
I AM NOT ENAGAGED IN PROVIDING LEGAL ADVICE AND THE VIEWS EXPRESSED ARE NOT THOSE OF MY EMPLOYER

Thanks for the very thorough reply. I appreciate you taking the time to explain this. As far as the situation of joint owners with single or joint POD beneficiaries, here is the justification as it was explained to me by the person teaching the seminar who is also an attorney. In my state, unless specifically designated otherwise, deposit accounts are held JWROS. The instructor said if one owner dies, funds go to the remaining owner and the POD designation does not come into play until all owners are deceased. I suppose one could argue that the surviving owner may not want a previously designated person named as POD beneficiary, but that owner would have the power to change the POD designation at any time.

I think I need to do further research into this!

As an old CSR supervisor with branches in different areas, I can tell you that the Joint Owner with a POD is a state law issue. Make sure the seminar you went to was dealing specifically with the law of the state that you are in.

cwilliams: I believe I somewhat understand what you were told.

If both joint owners agreed that the acct was POD upon the death of the survivor, then a joint acct could have a POD. In other words, both acct holders could agree that the POD beneficiary would be "X". Then the 1st to die could take some comfort that the survivor wouldnt change the designation upon his/her death. However, as far as the bank where the acct is held is concerned, the survivor can do what s/he wants. Therefore, if the intention was to ensure a particular POD designation, this could be easily defeated because the bank where the acct was held wouldnt be bound by the agreement btwn the joint acct holders.

In other words, why would anyone want to establish a jt acct that is also POD? Maybe fear of simultaneous death? If so, this is what wills (and simultaneous death statutes) are designed to address.

I seem to recall that all valid joint accts reqrd the 4 "unities" (time, title, interest and something else that I cant remember!).Moderators: pls help me out here. I dont think a joint acct holder can validly make a POD designation, and I think its because to do so would violate the reqrments of the 4 "unities". Any thoughts?

I AM NOT ENGAGED IN PROVIDING LEGAL ADVICE AND THE VIEWS EXPRESSED ARE NOT THOSE OF MY EMPLOYER

POD designations on multiple-person accounts are clearly recognized under Alabama's state code. And, as indicated, a joint survivor retains the right to remove or change the POD beneficiary. There are still a number of our customers who opt for POD designations outside of their will (and many probably using it instead of a will). I also agree the reason is probably "just in case we are both killed at the same time".

Also, speaking from experience, it is easier for the beneficiary(ies) to access the money for use while an estate is being settled. It can sometimes take quite a while to liquidate estate assets for final distribution.

I am one banker who is thrilled we finally have a point of law in Alabama to govern these accounts. Prior to the enactment of the Multiple Party Act, there was no point of law recognizing a POD designation and Alabama did not recognize totten trusts. Try explaining that to a customer!

Thanks Brenda! I wasnt aware of the Multiple Party Act. It provides that joint ownership of a bank acct and a POD designation are compatible? Do you have a cite in the AL Code?

As a former personal banker, we follow this rule of thumb: Whenever an account owner is removed, the account is closed and a new one opened (including reissueing a new CD). If we are adding an owner, beneficiary or changing beneficiaries we do a new signature card. If the customer has the CD with them we will change or add the names to it, if they don't our signature card rules the ownership and beneficiary information anyway. Minnesota also has joint with rights of survivorship, we frequently have POD designations on these accounts.

Another major consideration is the FDIC insurance coverage. POD accounts are separately insured from other individual and joint accounts. This additional coverage can enable your customer to keep much more money on deposit at your institution and have it be insured. We will almost always ask when opening as account if they want to list beneficiaries.

JeffP-You can find Multiple Person Act info in State of Alabama Code, Title 5. Sections 5-24-4 outline forms rules and 5-24-12 address rights at death.

CWilliams - An Aug 9 article on www.thebankingchannel.com, "Court Requires Hard Evidence to Change Ownership of a Lost CD", by Professor Robert Volk, is a painful reminder of how easy it is for a bank to make mistakes in handling retitling a CD--and subsequently cause a great deal of hardship for a customer. It makes interesting reading. (Case Law: In the Matter of the Estate of Milton Temple, 780 So.2d 639 (Miss. 2001)