May 29th, 2008
Naturally, if there weren’t a question, I wouldn’t be writing this post. :O) Many, many people became concerned after the recent ANB Financial failure. So I figured I would provide some clarifications and hopefully helpful information.
Here is the info from the FDIC (bolding added by me).
POD accounts are insured up to $100,000 per owner for each beneficiary if all of the following conditions are met:
- The account title must include commonly accepted terms such as “payable-on-death,” “in trust for,” or “as trustee for” to indicate the testamentary nature of the account. These terms may be abbreviated as “POD,” “ITF,” or “ATF.”
- The beneficiaries must be indentified by name in the deposit account records of the bank.
- The beneficiaries must be the owner’s spouse, children, grandchildren, parents, or sibling. A beneficiary that meets this requirement is called a “qualifying beneficiary.”
Much of the confusion has come about because many bank employees tell depositors that they just need to indicate the beneficiaries in the account records. This is not true. The account title must contain the “secret” letters as noted above. This means that if you are doing POD type accounts for the purpose of maximizing FDIC insurance coverage, you will probably need at least two accounts.
For instance, if you aren’t married, but have a sibling you can have up to $200,000 of insurance at each bank. You would need to have one account titled “Your name” for $100,000 and a second account titled “Your Name POD”. The second account also needs to have the beneficiary indicated in the bank records. Although not required, it would be a good idea if there aren’t too many beneficiaries to put them on the account title after the “POD”.
What should you do if your accounts don’t have “POD” indicated on them? That is an excellent question and I even sent the FDIC a message to clarify the requirements and I asked them exactly that. Although my personal belief is that the FDIC would honor the intent of the account, I wouldn’t want to risk $100,000 or more. Here is their response:
Inconsistent or incomplete records, in which the owner’s intentions are not clear or in which the regulatory requirements are not met may result in unintentional uninsured funds in the event of a failure of an insured bank.
As to your question, “What should a consumer do if a bank refuses to change the title, already has their funds, and refuses to send the uninsured funds back without penalty?” the FDIC would suggest filing a complaint with the FDIC stating the failure of the specific bank to comply with section 12 C.F.R. Part 330.10(b).? The website for filing a complaint is found at https://www4.fdic.gov/STARSMAIL/index.asp.
Feel free to contact us if you have any questions.
-- By +Chris Duncan