In General Elder Law

A “Pay on Death Account,” also known as a “Transfer on Death Account” (commonly called a P.O.D. or T.O.D. account), is an account at a financial institution that allows payment of the funds in the account to a designated person upon the death of the account holder. These accounts are common in states other than Louisiana and have been allowed in Louisiana since 1984. However, there is still much confusion regarding P.O.D. accounts among the public, financial institutions and even the court system. This article will attempt to address that confusion.

In the absence of a P.O.D. designation, funds held in bank accounts (with the exception of IRAs held at banks) pass at death to either the intestate heirs if the deceased has no will or to the legatees named in the will, if there is one. However, in 1984, Louisiana passed a law that allows a bank to pay to a beneficiary designated by the account holder the funds in the account at death of the account holder. Originally this law provided the beneficiary must be related to the account holder, but now he can name anyone as the beneficiary regardless of whether the beneficiary is related to him or not. Some, but not all, banks in Louisiana offer P.O.D. accounts to their customers. Similar laws also allow credit unions and savings and loans to also offer such accounts.

To create a P.O.D. account, the account holder must give a notarized affidavit to the financial institution naming who is to be the account beneficiary upon his death. The law also allows the bank to rely on this affidavit to disburse the funds to the beneficiary upon receiving a death certificate showing the account holder is deceased. The law further provides that the bank is not liable to the estate of the deceased or any heir of the deceased as long as they pay the account funds to the designated beneficiary. It also relieves the bank from any claims by a former or current spouse, an heir, a legatee under a will, a creditor or any other person who may have a claim to the funds. The law makes it very clear that the bank is protected from any liability from any claims by any person when they pay the funds in the P.O.D. account as authorized by the account holder.

Although this law protects the bank or financial institution when it pays a P.O.D. account, Louisiana’s substantive law on heirship was not changed by the passing of the P.O.D. law. In fact, the P.O.D. statute itself provides that it does not prohibit any right of forced heirship or the collation or collection of funds due any spouse, heir, legatee, creditor, or other person having rights or claims to funds of the deceased depositor. Therefore, it’s possible for a bank to pay the money in an account to the designated beneficiary while Louisiana’s substantive law provides that the money belongs to someone else. A common example would be a married person opening a bank account only in his or her name and depositing money earned during the marriage into that account. The account holder spouse has the right to designate someone other than their spouse as the P.O.D. beneficiary even though one-half of the money in the account belongs to their spouse according to Louisiana’s community property law. If this occurs and the account holder dies, the surviving spouse should have a claim against the beneficiary to get back their one-half of the money in the account and possibly a usufruct or right to use the other one-half in the account. The surviving spouse would not have a claim against the bank, however, as the P.O.D. statute limits the bank’s liability for payment. The same thing could occur if there are forced heirs or creditors who are entitled to estate assets.
As you can see, P.O.D. accounts have the potential to cause a great deal of confusion. Therefore, you should use extreme care when establishing P.O.D. accounts at your bank or financial institution. While there are circumstances where P.O.D. accounts may be warranted, the better practice is for you to integrate P.O.D. and other beneficiary-designated accounts into your overall estate plan. Failure to do so, may create conflict and/or litigation between the P.O.D. beneficiary and the legatees named in your will. When planning your estate, make sure you work with professionals who are familiar with all types of probate and non-probate assets to ensure your legacy will pass to your loved ones as you intend.

Ms. Melancon has engaged in the practice of law in Ascension Parish for the last fourteen years. The primary focus of her practice is estate planning, probate and elder law. For more information or to attend an upcoming estate planning seminar, call her office at 744-0027.

Showing 3 comments
  • Dale Walker
    Reply

    What if the deceased did not have a POD or designated a beneficiary? My father passed & his children are the only family he has. What processes must we follow to retrieve any & all bank accounts?

    • lcadm
      Reply

      We cannot give specific legal advice about a particular situation on our blog. However, generally, in Louisiana, a succession will be required to transfer property to heirs at the death of a loved one. For more information on successions, please visit The Learning Center on our website. /_newsletter/default.php?article_typeID=3

  • Tom
    Reply

    My wife and I, both Louisiana residents, have CDs at an internet bank. They are jointly owned and each have two named beneficiaries. If we both die, will the funds pass to our beneficiaries outside of probate?

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