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Make Sure Your Bank Doesn’t Mess Up Your Deposit Insurance Coverage

There are lots of rules with payable-on-death accounts.Like the smoke detectors in my home, I check my payable-on-death (POD) accounts twice a year to make sure they’re still operating properly.

Although not as basic as accurate account balances, correct POD designations are critical to my deposit insurance coverage.

Under FDIC and NCUA rules, I get $250,000 in extra insurance for each different POD beneficiary, up to five. (See the FDIC’s rules and limitations for more on these accounts.)

But I might not be protected if the institution doesn’t maintain adequate account records.

FDIC regulations require that, for a POD account to qualify as a “revocable trust account” entitled to extra insurance, the depositor’s intention to create such an account “must be manifested in the ‘title’ of the account,” using words or abbreviations such as “payable-on-death to,” “POD” or “ITF” (in trust for).

This “title,” the rules say, can be shown in a hard-copy document (e.g., a signature card) or in the institution’s electronic records, “through a code or otherwise.”

NCUA rules use somewhat different language, requiring POD status be indicated “in the title of the account or elsewhere in the account records of the institution.”

Because I move money often, chasing favorable rates, I’m frequently tinkering with POD accounts.

And, because this increases the chances of error, I check the accounts semiannually.

Thus, after recently making online beneficiary changes at Ally Bank, I discovered its website incorrectly titled three accounts.

And, while updating its software, Alliant Credit Union somehow managed to make a jumble of my beneficiaries, attributing some to the wrong accounts.

They’ve both made the necessary corrections.

And they both deserve credit for displaying POD information online.

Many institutions don’t, although they may, as Salem Five does, show the POD “title” on account statements.

But sometimes it’s not easy to verify from readily available bank records exactly how accounts are carried, so I keep my own records.

For example, my latest AIG Bank statement shows the same title for all my accounts, although some are POD and some aren’t.

However, I have original CD receipts showing the correct titles.

Where neither the website nor account documentation displays a title or a POD designation (Nationwide Bank, for instance), I’ve asked for email confirmations of POD information.

The federal agencies look to bank or credit union records to verify insurance coverage.

But having written evidence of my own at least gives me a fighting chance if a failed institution’s record keeping proves as shaky as its finances.

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