What is the Law for Beneficiary Designation for Bank Accounts?

Under federal banking laws, you can name pay-on-death beneficiaries on your deposit accounts. POD beneficiaries have no right to access the money in the account or obtain information about the account until the account owner has died. In some instances, state laws affect whom you can name as your beneficiary but only on certain kinds of accounts.


When you add a beneficiary to your account, your bank leaves the account in your name but adds the term "payable upon death" followed by the names of the beneficiaries. Banks can also use the terms "in trust for" and "as trustee for" instead of "payable on death.' You can name an actual person as your beneficiary or a charitable organization or non-profit group. However, you can only name non-profit groups and charities as beneficiaries if those organizations are classified as such by the Internal Revenue Service.

Individual Retirement Accounts

Many states have marital property laws which mean that when you die, your spouse automatically gains ownership of you Individual Retirement Arrangements. However, if you live in such a state, you can still name someone other than your spouse as your IRA bank account beneficiary. Your spouse must agree to sign a spousal consent form that includes details of the IRA account. By signing it, your spouse waives his right to your IRA money upon your death. POD designations in marital property states are null and void without spousal consent.


Under federal laws, POD accounts are classified as revocable trust accounts. This means that your beneficiaries gain control of the money in the account upon your death and without having to go through probate. However, state laws on joint bank accounts vary. In some states, if you die, your portion of the account goes to your POD beneficiaries. In other states, the joint owner assumes total control of the account. Therefore, check with your bank to see how your state's laws impact POD designations in terms of estate settlement.

Deposit Insurance

The Federal Deposit Insurance Corp. insures bank deposits for $250,000 per person, per bank. However, under federal law, the FDIC coverage also extends to POD beneficiaries. Each POD beneficiary brings a further $250,000 of coverage to your accounts. The FDIC assigns POD coverage on the basis of the number of beneficiaries per owner as opposed to the actual beneficiaries as individuals. Therefore, on a joint account a POD beneficiary would mean an extra $500,000 of coverage because both you and the other owner get the added coverage for naming that person as your own beneficiary.