Can Money Market Accounts Be Setup as POD Accounts?
Federal regulations enable you to title your deposit accounts in a number of ways. You can establish any kind of deposit account, including a money market account, as a "payable on death" (POD) account. Adding POD beneficiaries to your money market account results in increased deposit insurance coverage and can eliminate probate issues after your death.
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Revocable Trust
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The Federal Deposit Insurance Corporation (FDIC) recognizes POD accounts as a type of revocable trust. Funds deposited in the account are ultimately designed to pass on to someone else, but as the account owner you have the right to make changes to the account at any time. You can add or remove beneficiaries, or change the account to single ownership with no named beneficiaries. You pay taxes on a POD revocable trust account, just as you would if the account were held as a single-ownership or joint account with no beneficiaries.
Deposit Insurance
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The FDIC insures bank deposits for up to $250,000 per account holder per bank. The FDIC also provides an additional $250,000 of deposit insurance coverage for each POD beneficiary. The FDIC does not provide coverage on the basis of the individual named as the beneficiary, but instead provides coverage based on how many beneficiaries each account owner adds to the account. Therefore, you and your spouse could add $500,000 of deposit protection to your account by naming the same person as the beneficiary. The FDIC would insure the named beneficiary twice, as your beneficiary and as an account owner.
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Probate
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When the last surviving account owner dies, the money held in a money market account passes to the POD beneficiaries. Unless specified otherwise, funds are normally split equally between all named beneficiaries. Deposit accounts with POD beneficiaries do not pass through probate, which means your heirs can access the money immediately after your death. Most banks release funds as soon as the beneficiary provides the bank with a certified copy of the account holder's death certificate.
Money Market Funds
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Some people confuse money market accounts with money market funds. The former are deposit accounts available from banks and credit unions, the latter a type of conservative mutual fund. You cannot name a POD beneficiary on an investment account such as a mutual fund, but you can set up your securities to transfer upon your death to someone else. As with a POD account, a transfer-on-death investment account passes to your heirs without going through probate.
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