Payable on Death CD

We had a CD that was Payable on Death to two parties. At the time of death, one beneficiary was already deceased. We disbursed the funds to the surviving beneficiary. We are now being questioned as to why half the funds were not disbursed to the deceased beneficiary's estate. Is this what we should have done?

Payable on Death accounts are not authorized by the PA legislature. The account should have been set up as an informal trust (which is identical to a POD account).

With an "ITF" account, upon the death of all grantor/trustees, ownership passes to the surviving beneficiary.

Found this in the PA Title 20
Pa.C.S. § 6301.(b) Trust account.--At the death of the trustee or the survivor of two or more trustees, any sum remaining on deposit belongs to the person or persons named as beneficiaries, if surviving, or to the survivor or survivors of them if one or more die before the trustee or last surviving trustee, unless there is clear and convincing evidence of a contrary intent

Unless I am reading this incorrectly, it appears the funds should have been divided between the surviving beneficiary and the survivors of the deceased beneficiary.

Actually,

Title 20, section 6304 (Right of survivorship) says in part as follows:

(a) Joint account.--


(b) Trust account.--At the death of the trustee or the survivor of two or more trustees, any sum remaining on deposit belongs to the person or persons named as beneficiaries, if surviving, or to the survivor or survivors of them if one or more die before the trustee or last surviving trustee, unless there is clear and convincing evidence of a contrary intent; if two or more beneficiaries survive, there is no right of survivorship in event of death of any beneficiary thereafter unless the terms of the account or deposit agreement expressly provide for survivorship between them.

Swpa, you are correct, I took the initial post to read there was only one survivor beneficiary, so I did not include the part about multiple beneficiaries surviving. Thank you for including the entire definition, I did not mean to confuse anyone.

Sorry, I got interrupted. My intention was to state that, based on the language of the statue, my impression is that the word "survivor" is speaking of the beneficiaries and not heirs. Otherwise, the words "if surviving" has little meaning. Also, there is a state commission comment that says:

* * *
Subsection (b) continues existing case law that an account opened by “A” in his name as “trustee for B” usually is intended by “A” to be an informal will of any balance remaining on deposit at his death. The section is framed so that accounts with more than one “trustee,” or more than one “beneficiary,” can be accommodated.

Section 6303(b) would apply to such an account during the lifetimes of “all parties.” “Party” is defined by Section 6301 so as to exclude a beneficiary who is not described by the account as having a present right of withdrawal.

In the case of a trust account for two or more beneficiaries, the section prescribes a presumption that all beneficiaries who survive the last “trustee” to die own equal and undivided interests in the account. No further survivorship between surviving beneficiaries of a trust account is presumed because these persons probably have had no control over the form of the account prior to the death of the trustee. The situation concerning further survivorship between two or more surviving parties to a joint account is different.

Thank you for your clear interruption of the statue SwPa