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View Full Version : Bank Accounts: "Payable On Death" vs. "In Trust For"


Howard Kaikow
07-18-2005, 12:40 PM
For a bank account, what is the difference between adding someone as
"Payable On Death" or as "In Trust For"?

Rich Carreiro
07-19-2005, 01:02 PM
"Howard Kaikow" <kaikow@standards.com> writes:

For a bank account, what is the difference between adding someone as "Payable On Death" or as "In Trust For"?

Generally no difference.

--
Rich Carreiro rlcarr@animato.arlington.ma.us

Michael Jacobs
07-19-2005, 01:02 PM
Howard Kaikow wrote:
For a bank account, what is the difference between adding someone as "Payable On Death" or as "In Trust For"?

For a POD account, you would first of all have to make sure the State
in which the account is held recognizes such accounts. IMO most or
all of them do, but of course you would have to work with a bank
officer to open the account anyway, so that's kind of a moot point.

A POD account means that when the original account owner dies, the
title to the account (i.e. full legal and equitable ownership) passes
directly to the person named as the on-death payee. IOW, this
transfer is instantaneous and does not have to go thru probate of the
estate of the person who died in order for the payee to have immediate
access to the funds after the original owner's death. However, as
long as the original account owner is alive, the money is completely
his, to do whatever he wants with it; if the account is completely or
almost depleted by the time the original owner dies, the POD
beneficiary has no recourse, since he had no legally recognized
interest in whatever money was left in the account, until _after_ the
original owner dies. The laws recognizing POD accounts were set up to
provide an easy way for a person to pass funds to a beneficiary outside
of probate, but as you can see it does not protect the beneficiary in
any way before the owner's death.

A _TRUST_ account is different because the "beneficiary" -- the person
whom the money is being held in trust _for_ -- has a legally recognized
"equitable" or "beneficial" interest in the entire trust corpus
(principal) as well as any interest or other income earned by the trust
(unless the trust documents state otherwise); the named owner holds the
funds only as "trustee" on behalf of the beneficiary and has a
"fiduciary duty" to protect the corpus, see to it that it is wisely
invested to earn income, and NOT to use any of the trust funds for his
(the trustee's) own benefit. The money fully belongs to the
beneficiary as equitable owner, but legal title (the ability to
actually _do_ anything with the money, stocks, or whatever, such as
reinvest, sell, etc.) remains with the trustee until the trust comes to
an end. You may also need more than just a bank account that says "as
trustee for" to create a trust; all of the terms of the trust, powers
of the trustee, and rights of the beneficiary need to be spelled out in
a document creating the trust, unless the State of trust formation
provides certain statutory terms that will automatically be presumed to
apply if the parties don't say otherwise. There are lots of different
reasons to set up a trust, but the most common kind a private
individual is likely to set up (apart from various business deals,
which abound with all kinds of trust arrangements) is a trust for minor
children or grandchildren to provide for their care and support until
they reach a certain age. Trusts can be very complicated and have tax
consequences that may not be readily foreseeable to a lay person so it
is a good idea to have professional advice in setting one up.

-
This posting is for discussion purposes, not professional advice.
Anything you post on this Newsgroup is public information.
I am not your lawyer, and you are not my client in any specific legal
matter.
For confidential professional advice, consult your own lawyer in a
private communication.
Mike Jacobs
LAW OFFICE OF W. MICHAEL JACOBS
10440 Little Patuxent Pkwy #300
Columbia, MD 21044
(tel) 410-740-5685 (fax) 410-740-4300

Rich Carreiro
07-20-2005, 11:15 AM
"Mike Jacobs" <mjacobslaw@comcast.net> writes:

A POD account means that when the original account owner dies, the title to the account (i.e. full legal and equitable ownership) passes directly to the person named as the on-death payee. IOW, this

[snip]

A _TRUST_ account is different because the "beneficiary" -- the person whom the money is being held in trust _for_ -- has a legally recognized "equitable" or "beneficial" interest in the entire trust corpus

In my experiences as a non-lawyer but as someone who has so far been
an executor twice, "in trust for" means the same as "pay on death"
with all the banks I've dealt with. The account agreements I've seen
for "in trust for" all say that there are no restrictions on what
the owner can do and that the beneficiary has no right whatsoever
to the assets.

That is distinct from an account REGISTERED IN THE NAME OF A TRUST.

--
Rich Carreiro rlcarr@animato.arlington.ma.us

Stuart Bronstein
07-20-2005, 11:15 AM
"Mike Jacobs" <mjacobslaw@comcast.net> wrote:
Howard Kaikow wrote:
For a bank account, what is the difference between adding someone as "Payable On Death" or as "In Trust For"? A POD account means that when the original account owner dies, the title to the account (i.e. full legal and equitable ownership) passes directly to the person named as the on-death payee. A _TRUST_ account is different because the "beneficiary" -- the person whom the money is being held in trust _for_ -- has a legally recognized "equitable" or "beneficial" interest in the entire trust corpus (principal) as well as any interest or other income earned by the trust (unless the trust documents state otherwise);

I suspect he was referring to what is known as a Totten (or
tentative) trust.

Such a trust is a common law method for accomplishing what a POD
account does. As far as I am aware, the legal effects of the two
are essentially the same.

Stu

Howard Kaikow
07-22-2005, 11:21 AM
"Stuart A. Bronstein" <spamtrap@lexregia.com> wrote in message
news:uj1td19ijl6qaqcl9e7jof3jj6cndf4rd9@4ax.com...
I suspect he was referring to what is known as a Totten (or tentative) trust.

Bank Of America refers to POD as "aka Testementary Trust or Revocable
Trust"

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