38
www.
cbai
.com
+
Bank
notes
Community Bankers Association of Illinois
A
January 2013 opinion from the Illinois Fifth District
Appellate Court addressed a number of issues
concerning payable-on-death (“POD”) deposit
accounts and beneficiaries. The primary issue in
the case of
Fairfield National Bank vs. Chansler
was whether
the effort by a POD accountholder to change beneficiaries
was effective when the written request to change one or more
beneficiary(ies) was sent to the bank prior to the accountholder’s
death but was either not received or not acted on by the bank
until after the accountholder’s death. The Appellate Court
wrestled with an ambiguity in the Illinois Trust and Payable on
Death Accounts Act, because while that Act grants unfettered
right to a POD accountholder to change beneficiaries “during his
or her lifetime” it also states that the change must be directed
in the form of a written instrument “accepted by the (bank).”
The Appellate Court ultimately concluded that manifested
intent of the accountholder during his or her lifetime was
the paramount consideration, and the phrase “accepted by
the (bank)” refers to the
form
of the writing that a bank will
accept rather than the
timeliness
prior to which the change
of beneficiary request can be legally effective. Because the
accountholder had submitted the change-of-beneficiary
paperwork prior to her death (obviously), her requested change
was legally effective even though not received or acted upon by
the bank until after her death.
But the Court’s opinion, citing other case law precedents, is
informative on other POD-related issues. In one such case,
a 92-year-old POD accountholder asked the bank to remove
her niece as the beneficiary after questions were raised about
the niece exerting undue influence over her 92-year-old aunt.
The bank’s act of whiting out the beneficiary designation of the
niece was held to be a valid revocation of the POD designation.
Citing another case law precedent, the Appellate Court
noted that a POD account could exist if the intent of the
accountholder was made clear, even though the accountholder
failed to sign the signature card; in essence, that case ruled
that the form of the POD account and beneficiary designation
does not limit the “form” of the applicable designating written
instrument to signature cards.
In a related case, a different Illinois Appellate Court also
determined that there was no magic tying POD beneficiary
designations or changes of beneficiaries to signature cards.
In that case, the accountholder had written the names
of beneficiaries directly on Certificates of Deposit, and
subsequently crossed names out and wrote different names
directly on the certificates. Those circumstances were
deemed to constitute a written instrument evidencing the
intent of the POD accountholder with respect to his or her
beneficiary instructions.
The Fifth District Illinois Appellate Court in the recent
Fairfield National Bank
case also pointed out that Section 10 of
the Illinois Trust and Payable on Death Accounts Act provides
that the bank is not obligated to transfer ownership of funds to
any POD beneficiary “until presented with legal evidence of the
death of the holder and proper request by beneficiaries.” The
Court also mentioned that Section 5 of that same Act protects
a bank that has already in good faith made a distribution of
the deceased accountholder’s funds prior to being notified of
an adverse claim or controversy pertaining to the status of the
POD account or to the beneficiaries.
n
Legal Link is a free CBAI member benefit. For answers to your
general, banking-related legal questions, contact Jerry Cavanaugh in
the “Members Only” section of the CBAI web site,
Appellate Court Addresses
POD Beneficiary Issues
LEGAL LINK
DID
YOU
KNOW?
Often called
a
‘poor
person’s trust,’
a payable on
death account
is simply a
bank account
accompanied
with instructions
to the bank
to transfer
the account
to a specific
person after the
death of the
account holder.
Jerry Cavanaugh, CBAI General Counsel, Springfield, IL
