CD Deals Summary
Fed Meeting: Another 25-bp Rate Hike - Strategies for Savers
Fed Meeting Preview and Deposit Rate Forecast - March 15, 2023
Silicon Valley Bank Is Shut Down - Second Largest Bank Failure in HistoryCapital One Finally Allows POD Accounts But There Are Issues
UPDATE: 12/3/2018: Capital One has added an online management system for adding and managing beneficiaries. Please refer to this blog post for more details.
After many years of customer complaints, Capital One has changed its beneficiary policy for 360 deposit accounts. Customers can now designate up to 10 beneficiaries to each account. Once beneficiaries are named, the bank account will be referred to as a "Payable on Death" (POD) account.
Here’s the link to Capital One’s POD beneficiary form. Customers who wish to add individuals as beneficiaries to their 360 accounts must do so by mailing or faxing in this form. The document must be notarized and filled out in its entirety. I was told that they are working to make this a self-service option on the website.
Long before Capital One acquired ING Direct, customers have been unable to designate beneficiaries on their deposit accounts. The only alternative for ING Direct/Capital One 360 customers was to register their accounts as a living trust account. This is a formal revocable trust that is typically set up by an attorney, in which the owner specifies who will receive the trust assets when the owner passes away. This isn’t a good alternative to a POD beneficiary for most people who want a quick and simple way to designate a beneficiary on a bank account.
There are several reasons why you may want to designate account beneficiaries on your bank accounts. First, it can make it much easier on your heirs. When you die, the accounts don’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. Second, it’s an easy way to extend FDIC insurance coverage. As I described in this maximizing FDIC coverage post, it’s easy to insure up to $1.25 million at one bank by using five beneficiaries.
Unfortunately, Capital One’s new beneficiary policy has several issues. First, beneficiaries can only be individuals (no charities, entities or nonprofits). That can make it more difficult if a customer is using beneficiaries to extend FDIC coverage. Not everyone may have enough family or friends who they want to be beneficiaries. Also, there is more risk in the amount of FDIC insurance coverage when a beneficiary is an individual. If that person dies, you lose the extra FDIC coverage immediately. There’s no grace period.
The second issue with the new beneficiary policy is that Capital One requires that you specify the beneficiary’s US Tax ID (social security number or ITIN). Many people don’t want to know the social security numbers of their beneficiaries. They may not be close family members, and they may not want beneficiaries to know. Also, every time a social security number is given to another person or entity, the risk of identity theft increases. That’s one reason why institutions should only request a social security number when it’s absolutely necessary, and it’s not necessary for banks to know your beneficiaries’ social security numbers when you’re still alive.
The third issue with the new beneficiary policy is that customers must designate a beneficiary by using a paper form that must be notarized and then mailed or faxed back to Capital One. That’s a lot of work and time. However, this should only be temporary. As I mentioned above, I was told that they are working on a beneficiary management system for customers that will be available on Capital One’s website later this year.
Other internet banks have made it easy for many years to designate multiple beneficiaries. For example, Ally Bank has allowed up to 10 beneficiaries per account, and the beneficiaries can be a person or entity. No beneficiary social security number is required. Also, the beneficiary designations can all be done online on Ally’s website.
Capital One’s new beneficiary policy is a step in the right direction, but more improvements are needed.
Thank you, Ken, for picking up the problem about the Social Security number. I note, from the language they use on the form, it appears they REQUIRE that you have the beneficiary’s Social Security number, which is not required by law, this is their in-house policy; your beneficiary doesn’t even need to have a Social Security number. Just about all banks and credit unions will ask for that, but only very few actually require it. This is a long-running complaint of mine about the few banks or credit unions that require the Social Security number.
As Ken notes, a Social Security number is a highly sensitive thing that, for security reasons, should not be shared readily even with a friend. And I don’t even want it, if there were ever any issue of ID theft, I would have to be a suspect because I have their SS number! Just because you say you want to make someone your beneficiary does not mean they should give you their Social Security number, it is wrong to even ask a friend to hand over such a thing any more than to ask them to tell you all their bank accounts numbers. And, as in my case, it is not uncommon to NOT want your beneficiary to even know about being such, it can change their decisions in life, an impact I would not want, and it can lead to real problems and disappointments if you later decide to drop them as a beneficiary.
Thank you Ken for picking up on this problem. I think a LOT more publicity about it is needed so banks and credit unions will come to realize the issue too. I find that they don’t even seem to know what they are doing, at least some of these few that require the SS number seem to think they are required by law to get it; others insist they need it for identification later, but they do not, and gee, if it is so easy to get someone’s SS number merely by asking for it, then how could that be reliable identification!?
But, its also easy to just not do business with Capital One too.
And mind you, the $10 price I mention is per signature, so if you are doing this for a joint account, that is $20 for the two signatures just to satisfy Capital One with something they don't need!
And at this point, since literally everyone's SS number has been breached in hacking attacks at places like Equafax, it isn't at all a very good ID. You can do as well or better by providing birth date, current address and phone, which are all on a credit report the bank can access as wanted.
And it isn't just YOU who gets to decide whether the SS number can be obtained; the beneficiary might not think as you do and refuse to give it out, even if they know it is about being a beneficiary. They might feel like me that it is unnecessary so suspicious even from a close relative or best friend -- I would never give mine out to anyone, even if to be named as a beneficiary. Even my brothers don't know my SS number.
And a beneficiary does not need to have a SS number. I am thinking of naming two kids I know as my beneficiary and I know they don't have SS numbers. Yes, an SS number can be set up for a child, but parents don't necessary do that. That decision to set up a SS number for them is not mine. But I am still allowed by law to name them.
And as I always tell these places, the beneficiary can provide a SS number if the time should come.
Tell you what, DCGuy, give me you SS number, and I will name you as my beneficiary. OK?
Most people tend to not reveal their private numbers to others (even relatives). Back over 40 years ago, the SSN was an optional number. As long as you NEVER got a job, you did not have to get one. Now SSNs are assigned to all newborns, unless you were born out in the streets or fields where no outside government department could assign you one.
The SSN is considered PII information and can only be used or distributed for official purposes. I am not at liberty to disclose it to any third party since doing so would be treated as an unauthorized disclosure.
A POD pay on death, is the death of the account holder. Without a beneficiary the account has to go through probate. That requires a lawyer, and that equals money. The reason you want all your accounts to have a beneficiary, is because it passes over clean,and fast with the proff of death of the account holder with a death certificate.
Thank your stars that Cap One added the beneficiary form. Most of you problem did not even know there was none before. Have any idea what there answer was when I inquired about the form. I was told to set up a TRUST. Know what a trust cost to set up, MONEY. Fill out the beneficiary form,do the right thing for the ones you love, and stop the bull about the SS numbers. If its needed ,it for the purpose of ID. ANDif more than one beneficiary you should give the percentage left to each. That's what I would do ,you do what you want.
Not knowing, can't ask for, or wanting to supply S.S. of beneficiaries is a serious problem. Many financial institutions simply will not add beneficiaries without supplying them with their S.S. numbers even though it is not required by law.
Revocable Trust Accts. are a valuable tool to avoiding probate and additional lawyer fees and time delays. Trust Accts. cover much more than just CDs. Sometimes you have to spend a little money up front to save a lot of money in the end.
Your writing and reporting is one of the best things about this site -- in addition to the interest rate listings! :-)
As Ken mentions, ING Direct had provided this revocable trust option. Many of us were very pleased with this alternative - since discontinued by Capital One - although existing 360 accounts are at least grandfathered.
One major issue is that the newer, and higher-earning 360 money market account is unavailable for this account vehicle. The new POD arrangement does not meet the needs of many us, and I for one will not make a go of it.
However, the CSA stated that this is a priority for them, and that an internal timeline calls for a YE implementation date. That is good to know, but this has taken far too long and I am not sticking around to wait.
Updated for clarity.
We are going through the same red tape. We are told that the “executor” of the estate has to be the one to distribute funds! I thought the POD option was to avoid probate. My husbands cousin left half of his 360 CD to his son and half to my husband. We called Cap 1 and sent their “estate team” an email immediately and were told a “packet” was being sent to us. We still haven’t received the packet.
Your problems just re-enforces me to NEVER have any financial dealings with Capitol One.