Multiple-Party Accounts Basics: Payable on Death Accounts

Multiple-party accounts, such as savings accounts, checking accounts, and certificates of deposit, are valuable non-probate transfer tools.  Multiple-party accounts are inexpensive to maintain, widely used, and relatively easy to understand.  At the death of one of the depositors, the funds in multiple-party accounts are disposed of depending on the type of account, the account contract, and Texas Law.  This article discusses the second of three types of multiple-party accounts: the payable on death account, which transfers the balance belonging to the depositor to one or more payable on death payees.  One of the other two types of multiple-party accounts, the joint account, was discussed in an article posted 10/18/2010, while the other, the convenience account, will be discussed in a future article.

  1. Payable on Death Accounts – “A P.O.D. to B”

a.    Ownership – A P.O.D. account belongs exclusively to the original payee (A).  If there are multiple original payees, the ownership of the funds on deposit is governed by the joint account rules discussed above.  Unlike the beneficiary of a trust account, the P.O.D. payee is not permitted to establish ownership rights by demonstrating that the original payee had a different intent.

b.    Payment – Any original payee may withdraw all of the funds in a P.O.D. account.  The original payee is not required to obtain the consent of the P.O.D. payee and does not need to give any notice to the P.O.D. payee before making the withdrawal.  A P.O.D. payee lacks authority to withdraw money during the lifetime of the original payee.

c.    Effect After Death – When the sole or surviving original payee dies, any sums remaining in the account belong to the surviving P.O.D. payees, if there is a written agreement signed by the original payee or payees.

This column is published for informational purposes only. It should not be construed as legal advice and is not intended to create an attorney client relationship. The views expressed are those of the author and do not necessarily reflect the views of the author’s law firm or its individual partners.

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