Is It True We Cannot Have A Contigent Beneficiary On Certain POD Accounts?

paoli2 | Sep 11, 2017 | 2,641 posts since 2011

I was wondering how others handle a certain problem I incurred today at a local bank. I opened a promotional Money Market account for a large amount since I needed it to be a liquid account. I made it as a joint account (spouse and myself) and wanted to put my daughter as the contingency beneficiary in case due to an accident or other event, my spouse and I became deceased. The bank said they do not allow this on anything but Trust accounts. I was surprised since I have other institutions which do have a form where one can give a contingency beneficiary who does not have to be listed as a POD. The reason would be that one would not want the person to have access to the money until they inherited it.

It happens that the institution which allows this is one of my credit unions but not all credit unions will do this. Has anyone else incurred this problem with their banks for CDs and money market accounts especially. The banker I dealt with tried very hard to find a way to do it for me but could not. Sooo do we have to put these accounts as part of our Wills or does someone have other ways they use to protect funds when they cannot list a beneficiary? Much appreciation and thanks for any information on this problem.

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Answers

alan1 | Sep 12, 2017 | 876 posts since 2015

I don't understand what you're writing about.. A contingent beneficiary receives the funds if the beneficiary is deceased at the time of the death of the owner(s). But you're writing about wanting to have two owners, a contingent beneficiary, and no beneficiary.

In any case, in my experience, bank account forms usually do not give one the option to name a contingent beneficiary.

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Ally6770 | Sep 12, 2017 | 4,292 posts since 2010

A contingent beneficiary is used when the first beneficiary dies. They are used in IRA's etc.

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Ginzy | Sep 12, 2017 | 24 posts since 2017

My understanding paoli2 is that a POD account, (payable on death), does not give anyone access to the account until the actual death of the two account holders. It is not as if you are adding her name as an account holder. Should you or your husband die, the other would be the account holder, only if you both die, at that point, the POD allows for your daughter to control the funds.

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alan1 | Sep 12, 2017 | 876 posts since 2015

Ginzy -- your understanding is not correct (or is partially correct). What you write is true _if_ the account is jointly owned with right of survivorship. However, it's different if the owners are tenants-in-common. If the joint owners are tenants-in-common, the share of a deceased owner does not go to the surviving owner.

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me1004 | Sep 12, 2017 | 1,379 posts since 2010

I don't think you quite understand these matters. First, a POD beneficiary or an ITF beneficiary do not have any access to the account unless and until you die. You don't even have to tell them they are beneficiaries -- although you should make some way for them to be told if you die.

I also suspect there was a miscommunication between you and the CU about a "trust" account. A POD (Pay On Death) or ITF (In Trust For) IS a trust account. Are you perhaps saying you could do it as, say, a living trust with the living trust naming the beneficiary -- yes, you could do that, but you don't need to simply to avoid the beneficiary from accessing the account.

And by "contingency," I think you mean not the spouse, but who gets the money if both account holder die. That isn't technically a "contingency" beneficiary, that simply the beneficiary once the account holders die.

So, are you saying they would not let you open a joint account as a POD or ITF account? If they told you that, go up the ladder to a supervisor of the branch manager -- you might find out the lower level person simply was mistaken.

Or, I have come across some banks and CUs with unique oddities and actual wrongheaded beliefs about the laws on these matters -- they nearly always wrongly blame the Patriot Act or Rule D. I run into many banks and CUs who refuse to let you even name a beneficiary unless you can provide that person's Social Security number -- you do not have to provide their SS number, gee, you can't even ask someone for their SS number, that is highly private (not any more, now that it got out from the Equifax breach). I have had others who don't understand even their own power of attorney forms! Still others wrongly insist it is illegal to do an ACH withdrawal from a savings account, only from a checking account.

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paoli2 | Sep 12, 2017 | 2,641 posts since 2011

Thank you for all the replies and opinions but I really misunderstood what happened at my bank yesterday. (I think I have been watching too much hurricane shows on tv). What I really wanted was to get spouse taken off of the account and put daughter on as the POD since the money is really for her. I mistakenly put he and I as joint on it and didn't see her name anyplace and that started me off to "never, never land" thinking there were no beneficiaries if he and I died together.

I found out today that she is listed on all our accounts as the Payable Upon Death including the money market account. What was the problem is that the banker says she can't change the title once the account has been opened since it was a promotion and I already used the code. I would have to close it completely and take a lower interest rate to reopen a new account with new names.
I am thinking about whether or not to do this. In the meantime at least I know if he and I kick the pigpen, the money will not go into probate but to our daughter as the POD of the account.

Sorry I confused the issue but thanks for the help.

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Ricochet | Sep 13, 2017 | 522 posts since 2010

Dear Paoli, :) :) ;) Now you went and made up acronym that is going to confuse the next acct you might open. Going in asking for a PUD acct

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paoli2 | Sep 13, 2017 | 2,641 posts since 2011

Ricochet: Only you would catch that. "Upon" or "On" the person is still dead! However, my luck would be I would get a dinky banker who insists they do not have "PUD" accounts and the show goes on. So thanks for bringing this to my attention.

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me1004 | Sep 13, 2017 | 1,379 posts since 2010

paoli2, you might have a big issue. You expressed that you wanted your money to go to your daughter, and you wanted to take your spouse off -- as in you did not want that money going to the spouse -- and add your daughter as joint account holder.

If you want the money to go to your daughter in the event you die and your spouse lives, then the joint account will undermine that. In a joint account, the second account holder is the beneficiary in the event the first account holder dies, not the POD beneficiary. The POD comes into play only if both account holders die at once.

If you do not want this money going to your spouse in the event of only your death, then you better get your spouse's name off it. Mind you, if you were to die, your spouse would get the money -- and then could do whatever the spouse wants to do, including naming a different beneficiary.

As for the bank saying it already is locked into the CD, account title can't be changed without closing -- a lower level bank rep would not be able to do anything about that, you need to go to the branch manager. The branch manager will have much greater authority to do plenty of things -- but whether they will accommodate you in one way or another is up to them, some are more resourceful than others and some are more cooperative than others. You can only explain the mistake and ask. And pressure.

Don't forget, you have leverage here, you can close and take you money elsewhere if they don't want to cooperate, and you can play that card. Hey, if the branch manager says they can't do it, tell them to call headquarters for any needed permission. And if you have been a longtime customer there, point that out and tell them your longtime loyalty should get some loyalty in return.

If you can't get anything done about it, you might have to bite the bullet and take the loss of interest and close the CD early -- they should at least waive the EWP penalty, I would hope, and demand that. Meanwhile rates have been going up, you might find as good a deal elsewhere -- or better.

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paoli2 | Sep 14, 2017 | 2,641 posts since 2011

me1004: I think you are misunderstanding my problem. First of all it is not a CD. It is a promotional Money Market account. I meant to make it with my name and my daughter as POD only and spouse not on it. It ended up as a joint with spouse and daughter as POD. This is basically "her" money for all intents and if I die first, I can't return from grave and make sure spouse turns the money over to her at my death. In another life, I would have insisted he would surely do it but one can never be sure what someone will do when it comes to a large sum of money so I want to redo the money market account now to give daughter peace of mine about this and myself. And yes, she is his daughter but there are reasons, I have to protect her financial interests in this particular matter.

I may see if I can close the money market account, take a lower interest rate and be at peace about this. Our car got wrecked and now I have to wait until we get it fixed to get back to the bank.

Nothing happens in my life, at the right time. I will get it straightened out but first things first. Thanks for trying to help me.

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Ricochet | Sep 14, 2017 | 522 posts since 2010

The Nantucket Sunrise will see you through.

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me1004 | Sep 14, 2017 | 1,379 posts since 2010

paoli2, then yes, you do not want the spouse on as POD -- or when you die, the money will be his, not your daughter's. You want that simply as a POD naming your daughter as beneficiary. (As far as bank account setup. But you might want to ask a lawyer if there are any other legal considerations about any spousal claim to that money -- for one thing, as I recall over time in the threads, I think you are in a community property state, and I don't know if that can interfere with a POD account cutting out the spouse.)

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paoli2 | Sep 14, 2017 | 2,641 posts since 2011

ME1004: We used to live in a community property state and yes, they can tie you in knots with how you can and cannot do things. The only good thing about Katrina was she blew us out of that state and into one which from what I have learned is definitely "not" a community property state! I just had to have all new Wills made because the language in the CP state was not what was needed for where we are now. I just hope we can stay put now because I am tired of making new Wills!

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Ricochet | Sep 12, 2017 | 522 posts since 2010

Are you listing Two beneficiaries ?

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paoli2 | Sep 12, 2017 | 2,641 posts since 2011

No. My main concern is that the money does not go into Probate and my daughter might have to do more to access it. With her as POD this is now avoided. I understand that she will not have access to accounts or funds until we die. I never do the "Tenants in Common" thing. "With Rights of Survivorship" is usually the best way for our purposes.

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me1004 | Sep 14, 2017 | 1,379 posts since 2010

That is the issue I was talking about in parentheses above -- "until we die." If you make it a POD with the daughter as a beneficiary, that is saying to cut out the spouse, so there is no "we die" consideration, the only consideration is when you die.

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