Can POD (payable on death) bank accounts have a contingent beneficiary
Paul: Okay, Tom, on bank accounts, you can put down the beneficiaries. When I asked the bank I wanted to put down a contingent beneficiary, they said that's not allowed.
Atty. Tom Olsen: Correct. When we talk about IRAs, 401(k)s, retirement accounts, life insurance, that's where you have a primary beneficiary. If you're a married couple, it typically would be your spouse, and that's where you can have a contingent beneficiary that says, hey, if my spouse is already deceased, then it's going to these people. When you talk about bank accounts, checking, savings, money markets, et cetera, you can make those accounts POD, payable on death, and I would call that's a beneficiary, but you don't have contingent beneficiaries.
The best you can do is say, okay, I'm going to make this account POD for my three kids, and when you're filling out that POD form, I believe that they will give you an option that says, okay, you're making it POD for three kids. If child one happens to die before you, will his one-third go to his kids or will his one-third go to your two surviving kids? That's about as close as you can get to having a contingent beneficiary on a bank account. Paul, does that make sense?
Paul: Yes, but a question to what you just said. When I put down and say, three beneficiaries, I can allocate to each one a different percent.
Atty. Olsen: Absolutely. You can allocate different percentages, and you can make a determination about what happens if one of them happens to die before you.
Paul: Right. Okay. They won't let me put the percentages down. They said that's not allowed either. It would be equally split among all beneficiaries.
Atty. Olsen: Chrissy, you've asked a lot of clients about making their accounts POD. I'm almost sure that I've heard of banks allowing them to do different percentages.
Atty. Chris Merrill: Correct. What it comes down to, Paul, is the bank. Some will and some will not.
Atty. Olsen: Hey, Paul. Sometimes when they do the POD account, sometimes you're sitting with a banker, and they're typing information into their computer, and you don't really see what they're looking at. Sometimes, they say, here's a piece of paper, here's a form, fill it out. Sometimes, you can go online, and get your own piece of paper and fill out a form. Have you looked at the form itself to make your bank accounts POD?
Paul: Yes. It's a real simple one pager. It just says payable on death to these two people. It will be split equally.
Atty. Olsen: It doesn't give you an option to fill in percentages there.
Paul: No.
Atty. Olsen: Okay. Paul, it may just be your bank, but I'm pretty sure we've had other clients at other banks that allow you to do different percentages.
Atty. Merrill: Absolutely. Yes, it really does. Paul, sorry, but it's very bank to bank dependent. They really have their own rules, which is also why they even call it different things. Some call it payable on death. Other, they call it transfer on death. Other calls in trust for, other name it as beneficiary. It all means the same thing but each financial institution, they do have their own rules that way. That's why some clients will say, "Oh, they could do break the percentages, the whatever they wanted to, and others tell me the same as you."
Atty. Olsen: Paul, here's a potential workaround. If you've got a $100,000 and you want it to go to three people, 40,000, 40,000, 20,000, well, then break that $100,000 bank account up into three different bank accounts. Got 40,000 here, it's POD for this one person, 40,000 here, it's POD for this person, 20,000 here, it's POD for the other person. If you want to go to the trouble, that could be a workaround for you, Paul.
Paul: They told me to open up a trust.
Atty. Olsen: That's another tool for avoiding probate, but we've gone from something simple to something more complex but Paul, you may have a complex estate and a trust might be the right vehicle for you to accomplish that goal. Paul, if you want to call the Olsen Law Group next week, we'd be happy to talk to you about it in more detail.
Paul: You've already done it for me, and you've done a very good job. I just had this one question about contingency. Everything else you answer all the time.
Atty. Olsen: Thank you, Paul. We appreciate it. Hey, everybody, my name is Tom Olsen. The name of the show is Olsen on Law.
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