4000 - Advisory Opinions
Titling Requirements for Payable-On-Death Accounts
April 4, 1994
Adrienne George, Attorney
This is in response to your September 28, 1993 letter, which enclosed a copy of your earlier correspondence with the FDIC. I apologize for the delay in responding to your inquiries, which deal with the titling requirement for payable-on-death accounts described in 12 C.F.R. § 330.8.
In your letter, you enclose a copy of the current, [BANK] signature card, which you say is virtually identical to the old [BANK] card described in your earlier letter.
The section of the FDIC's insurance regulations dealing with payable-on-death accounts, 12 C.F.R. § 330.8, states that, in order for such an account to qualify for the special insurance coverage provided by that section, the owner's "intention [that the account belong to' the beneficiary upon the owner's death] must be manifested in the title of the account using commonly accepted terms such as, but not limited to, in trust for,' as trustee for,' payable-on-death to,' or any acronym therefor, and the beneficiaries of the account must be specifically named in the deposit account records of the insured depository institution." 12 C.F.R. § 330.8(a).
In your earlier letter, you write that such accounts are established in North Carolina pursuant to a state statute. The statute calls them "trust" accounts, although you believe that some of your competitors call them "POD" accounts. To comply with the North Carolina statute, [BANK] uses a multi-part signature card. The top part of the signature card contains various spaces for indicating the particular type of account. A customer wishing to establish a trust account under the North Carolina statute would have your banking representative mark an "X" in the blank next to "Trust (G.S. 53--146.2)." The depositor would then completely fill out the bottom part of the perforated signature card form, which is not titled [BANK] Trust Account (G.S. 53--146.2)." The beneficiary's name appears on the bottom card, along with other information to help the bank identify and contact the correct beneficiary after the account owner's death. The bottom card is stapled to the top part of the signature card and the two are filed together in a central location within the bank.
North Carolina law does not require that the account title contain any expression of the owner's intent to establish this particular type of account; for this reason, you write, all that appears on the account title line is the owner's name. Thus, if one examines only the account title, it might appear to be an individually-owned account. However, you continue, when the trust block is marked on the signature card and the separate beneficiary card is stapled to it, the bank's records as a whole indicate that the account is, in fact, a payable-on-death account. This information is also entered into the bank's computer system, so that it is also apparent from the bank's computer records that the account is a payable-on-death account.
Your concern is that the titling requirement of 12 C.F.R. § 330.8 might deny separate coverage to the interests of beneficiaries on these accounts, where the other requirements for separate coverage are met. You say that there are two aspects of your concern.
First, as to existing accounts, you think that it may be difficult for the bank's personnel and customers to add the FDIC's required reference to each account title. If, for instance, the FDIC proposes to use the signature card as the definitive source for the account title, you would have to require all of the account owners to execute new signature cards adding the "POD" or similar reference. You wonder whether you would then also have to require the customer to order new checks showing the revised account title with the proper reference. Alternatively, if the FDIC were to use the computer records as their source for the account title, you think that perhaps you could simply go into the computer system and make an entry adding the "POD" reference to each affected account title, without changing the signature cards and printed checks. A final alternative, which you say you would prefer, is for the FDIC to grant your bank an exemption from a strict reading of the language of 12 C.F.R. § 330.8.
The second aspect of your concern involves the changing of procedures for opening new accounts. You are concerned that, in spite of training efforts on your part, banking representatives may, on occasion, forget to type in the "POD" reference as part of the account title, thereby resulting in a beneficiary's interest's failing to receive the special coverage it deserves under 12 C.F.R. § 330.8. Although you say that you will look into whether there might be a failsafe way for your system to print "POD" as part of the account title when it prints out the signature card for any account where the "trust" box has been checked, you repeat that your preference is for the FDIC to issue an opinion stating that strict compliance with the FDIC's insurance regulations will not be required where other records of the institution clearly show that the account is a POD account.
We regret that we cannot grant you an exemption from the titling requirement of 12 C.F.R. § 330.8.
Where the account title has never contained "POD" or other similar words, the bank may attach a "POD Agreement" to the signature card, provided that such accounts are non-time deposit accounts which were established before July 29, 1990 or time deposit accounts until their first maturity date after July 29, 1990. For such a "POD Agreement" to be sufficient, however, it must both establish the payable-on-death nature of the account and list the beneficiaries of the account by name. After those dates, the depositor must see to it that the "POD" (or other similar designation) appears in the account title. For a time deposit account, the "POD" designation must appear both immediately after the account's first maturity date after July 29, 1990 and whenever the depositor actively rolls over the deposit. (Once the "POD" designation has been made the first time on a time deposit, however, subsequent automatic rollovers will carry the "POD" designation with them, requiring no further action on the depositor's part.) If the depositor fails to add the "POD" or similar designation to his account title after the above-mentioned dates, his relevant POD accounts will not be eligible for the special insurance coverage of § 330.8, but will be insured as if they were the individually-owned accounts of the depositor.
If a bank's signature cards did not show any "POD" designation, and if the bank undertook to make up new signature cards to show such a designation, it would not be necessary for the bank to require its customers to order new checks showing the revised account title.
If a bank were to change only its computer records to add the "POD" designation to each appropriate account title, this would not be sufficient to meet the "POD"-designation requirement of § 330.8. Once the "POD'' designation is made in the title of time and non-time deposits according to the effective dates above, the "POD" designation should appear in both the paper (e.g., signature card) and non-paper (e.g., computer) records of the bank.
You have also asked what happens if an employee omits to type the "POD" designation into the title of a new account. If the depositor can show that the bank's employee failed to do what the depositor told him to do (i.e., create a title for a "POD" account), the POD account will be awarded the special insurance coverage provided by § 330.8, provided that the account fulfills the other requirements for that coverage (e.g., the beneficiaries are listed by name in the bank's "deposit account records;" each beneficiary whose interest will receive special coverage is a "qualifying beneficiary"). Some of the factors that would help the depositor prove the bank employee's negligence would be if the signature card and the beneficiary's card stapled to the signature card gave notice of the trust nature of the account, or if data in the bank's computer records gave such notice, or if the computer records themselves gave the "POD" designation in the title of the account.
In addition to your earlier question, another question has arisen--in a POD account, must the beneficiaries be listed by name in the account title, or is it sufficient to put "Sam Jones, POD," in the title, then list the beneficiaries by name elsewhere, provided that they are listed in "the deposit account records," as that term is defined in 12 C.F.R. § 330.1(d). The FDIC's staff finds the second option permissible.
I hope that this information will prove useful to you. If I can be of any further help, I can be reached at (202) 898-3859.