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Fed Meeting Preview and Deposit Rate Forecast - Sep 13, 2023Banks & Credit Unions that Don't Allow POD Beneficiaries
Most banks and credit unions allow you to name payable-on-death (POD) beneficiaries on your accounts. Last month I reviewed my experience as a beneficiary claiming POD bank CDs. As I described in that post, having beneficiaries on your bank accounts can make it much easier on your heirs. When the owner dies, the account doesn't have to go through the probate process. This can save your heirs time and legal expenses. The beneficiary can claim the account directly at the bank or credit union.
Unfortunately, not all banks and credit unions allow POD beneficiaries on accounts. I know this is a deal killer for several readers so I thought it would be a good idea to highlight these institutions. If you know of others, please leave a comment.
ING Direct is one of the institutions that doesn't allow POD beneficiaries. I recently emailed ING Direct about this hoping that they may have changed. Unfortunately, they have not. Here is the reply I received:
At this time, we don't offer beneficiary, payable on death or custodial accounts. You may title an account in your own name only or in the name of yourself and a joint holder. You may also choose to register your deposit account as a living trust account. If you don't already have a Revocable Living Trust, you should contact a legal or financial advisor before you consider getting one.
ING Direct has more information about a living trust in its OSA product info section:
A living trust is a formal revocable trust that is typically set up by an Attorney, in which the owner (also known as a grantor) specifies who will receive the trust assets when the owner passes away. The owner of the trust has control of the trust assets during his or her lifetime and can change or revoke the trust at any time.
Another institution that doesn't allow POD beneficiaries is Digital Credit Union. This all-access credit union has become better known lately due to its very competitive CDs. A reader was attracted to the CDs but learned that DCU doesn't have a provision for beneficiaries. I did some searching, and found the following in DCU's Q&A section:
How do I add a beneficiary to a savings or certificate account?
Beneficiaries can be added to accounts only if they are held under a trust membership. Personal accounts are ineligible. For more information on trusts, please select here.
Neither ING Direct nor DCU make it simple for customers to specify beneficiaries. You first have to set up a trust which typically requires an attorney. If you are considering a trust, I don't have any experience in this, but a reader provided a useful comment in my beneficiary post which described some of the pros and cons of using living trusts as opposed to depending on PODs and a will.
It would be interesting to know the reasons why ING Direct and DCU have decided not to allow POD beneficiaries. I know ING Direct has received many complaints about this over the last decade. Some institutions have listened to their customers and added the capability of allowing POD beneficiaries. One example is SmartyPig. When they first launched, PODs were not an option. SmartyPig made the change to allow PODs in 2010.
Do you know of any other bank or credit union that doesn't allow POD beneficiaries?
Do the banks or credit unions pay less to the FDIC and NCUA if they don't offer POD and ITF accounts, thus making the FDIC and NCUA less liable if that banks fails? Maybe that is an incentive for this?
My problems with POD accounts at financial institutions has been that some demand I provide the beneficiaries' Social Security number. I don't have that, can't get it, and it is not required other than as an individual policy of that bank.
I note, one possible way to get around the lack of POD of ITF accounts being offered: put that money into a living trust, and have the living trust specify the beneficiaries. Then, open the account under the living trust, and don;t worry about specifying beneficiaries to the bank. I have read of this tactic elsewhere (maybe on this Website), and it said that the FDIC and NCUA do provide the extra insurance coverage once you show the living trust documents naming the beneficiaries. Of course, setting up a living trust can be burdensome and a little costly.
Lastly, Anonymous #3, my experience has been that most banks say that you must use their form for the POA, although some allow you to use your own if they approve it upon review. I have more luck with CUs allowing use of my own, but not all of them do. Nonetheless, it is my understanding that by law a POA form that meets legal standards MUST be honored if presented. However, that of course could provide for delay, as the bank would legitimately be able to take some time to have its lawyers review it. It is my understanding that the POA form makes the designated agent no different than you, and you (meaning your POA) are entitled to access your accounts. But clearly, it will be much more expedient to already have an approved POA form on file at the bank, and that normally means their form only. But it sure is a pain in the neck, and maybe costly, to have to do a new POA form every time you open an account! Here in Calif., $10 per signature on it! And your POA very well might not want to keep doing this -- it requires going to a notary!
Please bear with me...!
1. MYTHS - most banks and credit union reps and I'm taking about the top-tier (LARGE) ones, have misconceptions and many of these are based on never having received training on the FDIC /NCUA rules/regs.
Both FDIC/NCUA produce specialized materials for banks/CU's that they employees are supposed to use to train the reps (online and brick & mortar. When I've asked questions (I knew the proper answer beforehand) the replies the Reps give are 75-90% incorrect and are based on their personal "guess" and "logic" not validated knowledge.
Over the years, I learned that there is a Huge misconception by Bank/CU employees (at most, not all) branches...and calls to their corp office has not helped.
Let me start by providing some broad defintions:
Beneficiaries: are persons whom will receive account proceeds, in the % specified) when a single or all joint owners die.
At many institutions simply naming one or more beneficiaries provides the (above) instructions. But in many cases, it does not provide INCREASED FDIC/NCUA insurance in case the bank/cu fails!
Here, I have found a huge range. If your goal is to not only provide the above defined account distribution upon the death of all acct owners and ESPECIALLY if otherwise your total deposits at the instituation exceeds insurance limits defined in FDIC/NCUA regs...well, you really want the provide BOTH the benefits of a simply beneficiary notation AND increased fdic/ncua insurance coverage by setting up the account with itf or pod or totten trust in the account title. All 3 are roughly equivalent.
Some banks, (Chase is a good example) appear to "automatically" create POD/itf status when you ask for named beneficiaries...thus giving added bank insurance.
NCUA, appears to accept the fact that an account with named beneficiary(s) is assumed to be an itf/pod/totten insured account.
POA,s: Basically allowing one or more persons to transact business with the bank/CU in place of an account owner *(while the owner is still alive). Many institutions will NOT permit a named POA to open a new account nor renew a maturing CD. POA forms: Most states define the format data and so forth for a valid POA. It is always best to use an official state form which usually equires notarization or affirmation and to present this to the bank/cu during account opening. DO NOT WAIT UNTIL IT IS NEEDED TO PRESENT IT at the bank/CU!! A number of banks/CUs will provide their own customized POA form they want used. But in most cases, (I live in NY) using a Printed POA form approved by your state creates a situation in which the bank/cu is legally required to accept the POA.
A good source of POA and other forms legal for each state is: http://www.blumberg.com/forms/
Lastly, using a POA does NOT increase the amount of FDIC/NCUA insurance. I hope this information is helpful.
We do require a form to be set up for this purpose and every type of savings, checking, certificate, or money market account we offer can be under it. There are no fees to do so.
For more information, please visit this page: https://www.dcu.org/prodserv/savings/totten.html
Tim Garner, SVP Marketing & Strategy, DCU
"I note, one possible way to get around the lack of POD of ITF accounts being offered: put that money into a living trust, and have the living trust specify the beneficiaries. Then, open the account under the living trust, and don;t worry about specifying beneficiaries to the bank"
If I am understanding you correctly, you are saying the bank doesn't have to know who your beneficiaries are. I would disagree with that. I have opened accounts at 6 banks in trust name, and each one has required a copy of the trust document or no go, and they especially look at the names of the beneficiaries, and the percentage of ownership in the trust. Using a trust is invaluable if you are over the $250K limit of FDIC insurance, as each beneficiary is eligible for $250K of FDIC insurance, subject to some exceptions, such as if the shares as spelled out in the trust are not equal.
I agree with usdpennies that most banks don't know anything about the FDIC, beneficiaries and trust limitations. FDIC.gov has a wealth of info on this topic.
Both of my parents died three years ago. They had credit union accounts in excess of half a million dollars. Their wills said that assets were to be divided evenly between my two brothers and I. Unfortunately they added one brother as POD on the accounts; this brother inherited all the money and was not legally obligated to share (and choose not to).
Turns out some "helpful" customer service person at one of the credit unions encouraged my 90 year old father (who didn't understand much about legal issues) to add a POD beneficiary to his accounts in order to keep his assets out of probate. This same person was also discussing my parents' account information with my brother (who had no legal right to know this information; he was very good at manipulating people by posing as the caring, dutiful son).
If you were ****ed out of your inheritance as I was, not allowing PODs on accounts sounds like a ****ed good idea unless people are informed of the consequences. Bank employees should not be telling people how they should set up their accounts. They are not lawyers or estate planners.
Very soon thereafter, that son had my mother commited to a nursing home, claiming that she had dementia! The he took the power of attorney to every bank and got them to change every title of every CD to his name! Being that she was declared incompetent by reason of dementia, she was involuntarily stuck for the rest of her life in a nursing home and my bother had all her money in his name. And yes, her will said to divide everything equally among her children when she dies, but now she has nothing to divide since everything was already in my brother's name before she died!
US Bank allows POD's but you cannot name your living trust as a POD in order to transfer the funds.
Capital One 360 apparently only allows POD on IRA accounts and not regular accounts.
Need a law.
It IS BAD ENOUGH THAT PA IS ONE OF THE remaining states THAT DO NOT ALLOW pod OR tod IN REFERENCE to autos AND REAL estate. Now some businesses ARE TRYING TO Rob citizens OF OTHER OPTIONS to advance financially.
I will BE LOOKING for an institution that value my monetary contributions more.