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Managing My Payable-On-Death Accounts

change, dollar bills and a golden egg in a bird's nestWith 40-plus years of accumulated savings deposited in banks and credit unions, I consider my payable-on-death beneficiaries to be extremely valuable assets.

They include two individuals and four nonprofit, tax-exempt entities.

I use POD accounts solely to increase FDIC and NCUA insurance coverage, not for estate planning.

Under the rules, I can obtain $1.25 million in insurance covering five POD beneficiaries ($250,000 times the number of beneficiaries) at one institution – plus $250,000 for individual accounts without beneficiaries and $250,000 for retirement accounts.

However, my POD accounts must be consistent with my will — I don’t want those naming any single beneficiary to exceed the specific amount I’m providing for that beneficiary under the will.

So, I watch over my POD accounts closely.

Here’s how:

I eliminate POD accounts I no longer need for insurance protection.

For example, when I opened a large CD at USAA Bank in 2011, I added a POD beneficiary to an existing CD because my combined balances exceeded $250,000.

When the 2-year CD recently matured, I removed the beneficiary on the other CD, freeing it for use elsewhere.

Where possible, I replace individual POD beneficiaries with tax-exempt nonprofits.

Although federal rules have recognized tax-exempt, nonprofit organizations as valid POD beneficiaries since 2008, certain institutions (USAA, Salem Five and American Express Bank are some I deal with most frequently) don’t recognize “entities” as beneficiaries, only “natural persons.”

Consequently, whenever I can replace an individual with an institutional beneficiary, I do.

This gives me flexibility should I stumble upon a compelling promotion by a bank or credit union that limits PODs to natural persons.

I periodically verify the continuing tax-exempt status of my institutional beneficiaries on the IRS website.

My smallest beneficiary once lost its tax exemption (it’s since been restored).

Although an account for which I’ve named a nonqualifying POD beneficiary might be small, I may be using the beneficiary to support insurance on other POD accounts.

I recheck my math.

I sometimes make mistakes doing simple addition.

I double-check my calculations to avoid winding up with, say, $275,000 in non-POD individual accounts or having accounts for one beneficiary exceeding the amount provided in my will.

And, where I have a large number of accounts, with multiple beneficiaries, I like to run the numbers through the FDIC or NCUA online deposit insurance calculators ( and to make sure I’m OK.

With all of this, I hope to maximize the value of my precious POD assets.

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