The owner of a POD account is insured up to $100,000 for each beneficiary if all of the following requirements are met:
- The account title must include a commonly accepted term such as "payable-on-death," "in trust for," "as trustee for" or similar language to indicate the existence of a trust relationship. The term may be abbreviated (for example "POD," "ITF" or "ATF").
- The beneficiaries must be identified by name in the deposit account records of the insured bank.
- The beneficiaries must be "qualifying," meaning that the beneficiaries must be the owner's spouse, child, grandchild, parent, or sibling. Adopted and step children, grandchildren, parents, and siblings also qualify. Others including in-laws, cousins, nieces and nephews, friends, organizations (including charities) and trusts do not qualify.
A reader who has investigated this issue with National City recommends that if you have an existing account to insist on new signature cards for EACH account and have POD/ITF typed in the title area and to get a copy of each signature card. You might even insist that the employee initial the typed in area. If you get a new account, insist that the National City employee type in the account title area either POD or ITF and to get a copy of EACH signature card for each new account.
Previous to this, she had faxed her signature card to the FDIC before the account title was changed. Here is part of the reply she received from the FDIC:
It appears there was an attempt to create an informal revocable trust account, but the account does not comply with FDIC deposit insurance requirements that the title of the account indicates it is a payable on death (POD), in trust for (ITF), or as trustees for (ATF) account.
Another reader has reported receiving similar information from the FDIC:
I recently noticed that while they are listed in the signature cards, the title of the accounts do not have the required term 'POD' or similar wording.
Several visits and calls to them and they said thats the way our software works. We cannot put it in the title of the account.
I spoke to a senior rep at FDIC today and he told me they have met with officals of the bank and warned them that these accounts DO NOT qualify for FDIC insurance for the expected beneficiaries.
Here's some good advice from another reader:
You cannot trust what the WaMu employees tell you, even if it is the bank manager.
The bank MUST put the letters POD or ITF in the account title. For example: "John Doe POD"
Do not take "no" for an answer.
If they refuse, find another bank paying the rate you want who will be more than happy to type those three little letters inside your account title.
If you're depending on PODs to extend your FDIC coverage at a bank, I would recommend checking with bank and the FDIC to verify coverage for your specific case. Make sure what the bank tells you is consistent with what the FDIC tells you. More details about using PODs to extend FDIC coverage is available in this post.
POD Accounts at Credit Unions
For credit unions, it seems the NCUA is more lenient than the FDIC in terms of account title requirements. You can see in the NCUA rules that there's no mention of account title.
However, a reader found this NCUA document in which the NCUA was trying to amend their rules to follow the FDIC. Strangely, the NCUA thought this change would be beneficial. Fortunately, many credit unions opposed the change and the NCUA decided not to adopt it. Here are excerpts from the document:
NCUA proposed that the member's intent to create a revocable trust be noted in the title to the account.
NCUA received sixteen comment letters regarding the proposed rule: Six from federal credit unions (FCUs), two from state credit unions, and eight from credit union trade organizations.
The commenters expressed general support for all of the proposed amendments, except for the titling requirement in the revocable trust account provision. Fifteen commenters strongly opposed the titling requirement and expressed the same or similar concerns.
as a result of the information provided by the commenters and other interested parties, NCUA has decided not to adopt the proposed titling requirement at this time because of the difficulties commenters identified that some FCUs would have in adapting their data processing systems and account forms.
It would be nice if the FDIC would follow the NCUA and remove this account titling requirement. I don't see how this account title requirement benefits anyone. It makes it more difficult for the institutions, and more importantly, it puts at risk customers' hard earned money.