USING DEPOSIT ACCOUNTS
IN ESTATE PLANNING
By: James M. Bright
Attorney at Law
The following is provided for informational purposes only and is not, nor should it be construed as legal advice.
One of the areas of concern which is often encountered after the death of a loved one is, “How do deposit accounts pass?” (This may be C.D.s, bank accounts, savings accounts, etc.)
The Texas Estates Code offers the following descriptions of ways that an account may be set up and how the property in such an account passes upon death.
Single-Party Account Without “P.O.D.” (PAYABLE ON DEATH) DESIGNATION. The party to the account owns the account. On the death of the party, ownership of the account passes as a part of the party’s estate under the party’s will or by intestacy.
Enter the name of the party:
(Example: John Doe, Account Owner)
SINGLE-PARTY ACCOUNT WITH “P.O.D.”(PAYABLE ON DEATH) DESIGNATION. The party to the account owns the account. On the death of the party, ownership of the account passes to the P.O.D. beneficiaries of the account. The account is not a part of the party’s estate.
Enter the name of the party:
(Example: John Doe, Account Owner)
Enter the name or names of the P.O.D. beneficiaries:
(Example: Doe Daughter)
MULTIPLE-PARTY ACCOUNT WITHOUT RIGHT OF SURVIVORSHIP. The parties to the account own the account in proportion to the parties’ net contributions to the account. The financial institution may pay any sum in the account to a party at any time. On the death of a party, the party’s ownership of the account passes as a part of the party’s estate under the party’s will or by intestacy.
Enter the names of the parties:
(Example: John Doe)
(Example: Doe Daughter)
(Example: Doe Son)
MULTIPLE-PARTY ACCOUNT WITH RIGHT OF SURVIVORSHIP. The parties to the account own the account in proportion to the parties’ net contributions to the account. The financial institution may pay any sum in the account to a party at any time. On the death of a party, the party’s ownership of the account passes to the surviving parties.
Enter the names of the parties:
(Example: John Doe)
(Example: Doe Daughter)
MULTIPLE-PARTY ACCOUNT WITH RIGHT OF SURVIVORSHIP AND P.O.D. (PAYABLE ON DEATH) DESIGNATION. The parties to the account own the account in proportion to the parties’ net contributions to the account. The financial institution may pay any sum in the account to a party at any time. On the death of the last surviving party, the ownership of the account passes to the P.O.D. beneficiaries.
Enter the names of the parties:
(Example: Doe Husband)
(Example: Doe Wife)
Enter the name or names of the P.O.D. beneficiaries:
(Example: Doe Son)
(Example: Doe Daughter)
CONVENIENCE ACCOUNT. The parties to the account own the account. One or more convenience signers to the account may make account transactions for a party. A convenience signer does not own the account. On the death of the last surviving party, ownership of the account passes as a part of the last surviving party’s estate under the last surviving party’s will or by intestacy. The financial institution may pay funds in the account to a convenience signer before the financial institution receives notice of the death of the last surviving party. The payment to a convenience signer does not affect the parties’ ownership of the account.
Enter the names of the parties:
(Example: Doe Husband)
(Example: Doe Wife)
Enter the names of the convenience signers:
(Example: Sally Convenience)
(Example: John Convenience)
TRUST ACCOUNT. The parties named as trustees to the account own the account in proportion to the parties’ net contributions to the account. A trustee may withdraw funds from the account. A beneficiary may not withdraw funds from the account before all trustees are deceased. On the death of the last surviving trustee, the ownership of the account passes to the beneficiary. The trust account is not a part of a trustee’s estate and does not pass under the trustee’s will or by intestacy, unless the trustee survives all of the beneficiaries and all other trustees.
Enter the name or names of the trustees:
(Example: Husband Doe)
(Example:Wife Doe)
Enter the name or names of the beneficiaries:
(Example: Doe Daughter)
(Example: Doe Son)
The prudent estate planner will examine each of the above account types to determine the best type of account to meet a particular goal or purpose.
Some examples of how these accounts might be used are as follow:
To be certain that a surviving spouse or child has sufficient liquid assets to cover the immediate costs which may arise after your death, you may wish to place at least some of your funds in a “P.O.D.” (payable on death) account. (Some of those costs might be unforeseen funeral expense, ongoing debt payment, etc., until such time that your will has been admitted to probate.)
To be certain that your deposit accounts are distributed in accordance with your will and that each of your heirs receives the amount that you intend, you may wish to place the bulk of your deposit assets in an account which does not have a “P.O.D.” provision. Obviously, if everything is to go to one person (such as a surviving spouse), a P.O.D. account creates no harm, but if you have three children who are to split the account equally, a P.O.D. account which names only one of your children may yield an unwanted result. It must be remembered that P.O.D. accounts do not become an asset in your probate estate and, therefore, are not governed by the instructions in your will. This can be either a “blessing” or a “curse” depending on what result you seek.
As always, you can find help (if needed) by consulting your financial advisor, banker or attorney.
James Bright is admitted to practice before the Federal Courts for the Southern District of Texas and Eastern District of Texas as well as all of the Justice Courts, Probate Courts, County Courts at Law, District Courts, Courts of Appeal and Supreme Court for the State of Texas. He maintains an office in Houston and by appointment another at 208 McCown Street in the heart of historic Montgomery. Contact may be made by telephone (936) 449-4455 or (281) 586-8277. For more information about wills or probate in Texas, please see- www.houstontxprobate.com