Many financial accounts are payable-on-death (POD) accounts. While POD accounts can often be simpler to dispose of after death than other types of assets, they are not immune from legal complications. Consider the examples below.
Suppose a person dies with a trust that calls for their bank account to pass to a trust beneficiary. However, years before, they had designated a different beneficiary on their bank account. Does a trust override a beneficiary on a bank account in this scenario?
Suppose a relative manipulated a person with declining mental capacity into designating them as a beneficiary on their bank account. Can you contest a beneficiary on a bank account in this scenario?
Suppose a person dies with a last will and testament that calls for their bank account to pass to their surviving spouse, but they previously designated their two children as beneficiaries on the same account. Can a spouse override a beneficiary on a bank account in this scenario?
The rules surrounding financial accounts have the potential to get even more nuanced when the accounts at issue are joint accounts with rights of survivorship or transfer-on-death accounts, which are different from POD accounts. Consider the following examples.
Suppose a person dies having designated their adult child as a beneficiary on their bank account, but because the account had been jointly owned and the other account owner is still alive, the child is unable to access the account. Can a right of survivorship bank account be challenged in this scenario?
Suppose a person dies having designated their sibling as a beneficiary on their retirement account, but because they had a surviving spouse and resided in a community property state, the spouse is claiming they did not have a legal right to dispose of the account to someone other than them. Can a transfer-on-death account be contested in this scenario?
Though meticulous estate planning can greatly mitigate the risk of legal complications related to bank accounts arising after account owners’ deaths, it’s important to understand what steps to take in the event they do arise, as well as what your rights and limitations may be in such a situation.
In this article, we examine the different kinds of financial accounts a person may have, how they are disposed of after death, and whether or not they can be contested. For reasons we will explain later, contesting financial accounts can be significantly more challenging than, say, contesting wills or contesting trusts. As a result, working alongside a skilled probate attorney to navigate the process is a must.
What Is a POD Account?
A POD account is shorthand for a payable-on-death account. A payable-on-death account is exactly what it sounds like: an account whose contents can be paid out to the beneficiary named on the account upon the account owner’s death, but not before. In other words, a POD account is an account with a beneficiary designation. Almost all POD accounts are bank accounts.
To convert a standard bank account into a POD account, the account owner must fill out a Totten trust form with their bank. This makes their bank the trustee of their account and authorizes it to release the account’s funds to the designated beneficiary on the account once the account owner dies.
From an estate planning perspective, POD accounts have many advantages. For one, POD accounts generally bypass the probate process, leading to cost and time savings. Second, POD accounts generally allow for beneficiaries to access their contents faster than if they were being disposed of by will or trust. Third, POD accounts can be easily changed or revoked.
While these advantages are why many estate planners encourage their clients to convert their standard bank accounts into POD accounts, the ease with which such accounts can be liquidated after the account owner’s death can make contesting them a challenge — albeit not impossible.
As with any type of property dispute, you must have grounds for bringing your dispute. In the same vein, you can only bring a dispute if you stand to potentially benefit from its outcome. We’ll dive more into grounds and standing in the next section.
When Can a Beneficiary Designation Be Contested on a POD Account?
As previously discussed, you must have valid grounds and standing to contest the beneficiary on a POD account. Standing simply means that you have a financial stake in the outcome of the matter. If winning a contest would mean you inherit a larger portion of the POD account than you currently stand to inherit, you have standing. If winning a contest would mean you inherit less or nothing at all, you don’t have standing.
Consider this hypothetical situation. You were your sick parent’s caretaker for the final few years of their life, whereas your sibling was completely absent from their life. Upon your parent’s death, you learn your parent died intestate and designated your sibling as the beneficiary on their POD account instead of you. You wish to contest the POD account because you believe your sibling is undeserving of this sizable gift. Can a beneficiary designation be contested in this situation?
While your sibling may not be deserving of the inheritance your parent left them, that will not suffice as a reason for contesting the POD account in the eyes of the court. To contest a POD account, you must prove the beneficiary designation on the account does not reflect the account owner’s true final intentions. That said, you likely would meet the standing requirement, since winning your contest could potentially entitle you to inherit the asset via intestate succession.
Consider a similar hypothetical situation. You were your sick parent’s caretaker for the final few years of their life. As a result, they left you the entirety of their estate, including their bank account, in their will. However, in the final few days of your parent’s life, at a time when your parent was no longer coherent, your estranged sibling showed up out of the blue and without your knowledge to take your parent to their financial institution to convert their standard bank account into a POD account. You come to learn of this after your parent already had died and your sibling already had liquidated their bank account. Can a POD account be contested in this situation?
The answer to this question likely would be yes. Based on the circumstances surrounding the situation, it seems your sibling could have coerced or otherwise influenced your parent to designate them as a beneficiary on their bank account. In doing so, they may have caused your parent to override their own free will. Your sibling’s actions may have been unethical; therefore, you would be perfectly justified in contesting their POD beneficiary status. You likely would also meet the standing requirement.
Now that you have a general understanding of what it takes to contest a POD account, we’ll delve into specifics. In the following section, we’ll discuss the most common grounds on which our attorneys help their clients contest POD accounts. Keep in mind the grounds for contesting POD accounts are virtually identical to the grounds for contesting wills and trusts (with a few minor exceptions).
Undue Influence
Undue influence refers to excessive pressure or force being exerted on someone, which in turn causes them to act against their own free will or disregard potential consequences when making a decision. Undue influence serves as a ground for contesting a POD account.
Suppose your parent had previously designated you as a beneficiary on their bank account. However, after their death, you find out their POD account had been changed in the final days of their life, and now, only your aunt is designated as a beneficiary. Not only had your parent never expressed an intent to leave your aunt anything, but your aunt had moved in with your parent after they became sick and proceeded to isolate them from the rest of the family. If you believe your aunt did this to unduly influence them, you likely would be right.
Remember, suspicions of undue influence aren’t enough to contest a POD account; you must be able to show evidence of the act.
The elements of undue influence you should be able to establish include:
- The vulnerability of the victim
- The influencer’s authority
- The overt tactics of the influencer
- Inequitable results
As you may have already deduced, undue influence usually is proven with circumstantial evidence as opposed to direct evidence, since direct evidence is rare to come across in such cases. To secure the best possible outcome in a matter involving undue influence, it is recommended you work with a qualified attorney to gather evidence and present your case to the court.
Fraud
Fraud refers to an act of intentional deception for the purpose of personal or financial gain. Fraud can serve as a valid ground for contesting POD accounts.
Suppose your parent’s live-in caregiver asked your dying parent to sign a form they claimed was a medical consent form but actually was a Totten trust. Being that your parent had a close relationship with their caregiver and fully trusted them, they signed the form without examining it. However, after your parent’s death, you learn the true nature of the form your parent signed. If you suspect your parent’s caregiver may have committed fraud, you likely would be right, as they intentionally deceived your parent for personal gain.
Just like with undue influence, you will have to prove fraud with evidence. In other words, you will have to show that the act of deception was intentional and resulted in personal or financial gain for the perpetrator.
That said, the burden of proof can shift under certain circumstances. For example, in the situation described above, rather than you needing to prove the caregiver committed fraud, the caregiver would need to prove they did not commit fraud, since there is a presumption of wrongdoing when certain categories of disqualified persons receive a substantial gift from a deceased person.
Disqualified persons may include:
- Drafters of instruments
- Attorneys
- Fiduciaries (e.g., trustees, personal representatives, conservators, powers of attorney)
- Care custodians
- Blood relatives, spouses, cohabitants or employees of the aforementioned parties
Lack of Capacity
A lack of capacity refers to a person not possessing the capacity required to sign a legal document. A lack of capacity is common in older individuals or individuals with cognitive disorders, such as dementia.
The degree of capacity required to sign documents can vary based on the complexity of the document at issue. A will, for example, requires less capacity to sign than a trust, since trusts tend to be significantly more complex than wills. In the same vein, a Totten trust would likely require only a basic degree of capacity to sign due to the straightforward nature of the document.
Suppose your uncle with Alzheimer’s disease converted his bank account into a POD account at the urging of his personal banker, who had been unaware of his diagnosis. The beneficiary your uncle designated on the account contradicts the beneficiary he named in his will (which he executed prior to being diagnosed with Alzheimer’s) to inherit the same asset. If you believe your uncle lacked the capacity to sign a Totten trust, you may be right. Your uncle may not have understood the nature or implications of the document he was signing, as it contradicted his will.
Even though your uncle probably lacked the necessary capacity to sign a Totten trust, the designated beneficiary on his bank account most likely would be able to claim the account immediately following your uncle’s passing by showing proof of his death and proof of their own identity. This doesn’t mean a POD account can’t be contested; it just means that the funds from the account will need to be recovered from the designated beneficiary. That said, there is always the possibility of the designated beneficiary having spent all the funds before you’ve had a chance to recover them.
In many instances, property disputes involving bank accounts can be resolved with a type of petition known as an 850 petition. This expedited procedure can help facilitate the transfer of property into or out of estate or trust without the property having to pass through probate.
Creditor Claims
A creditor claim is a claim entered with the estate of a deceased person for repayment of their outstanding debt. The law generally requires for all valid creditor claims to be satisfied before the executor/administrator distributes any estate assets to estate beneficiaries or heirs.
Because creditor claims and other expenses (e.g., probate fees, funeral and burial costs, estate administration costs) take precedence over distributions to beneficiaries, it is not uncommon for beneficiaries to receive nothing from a deceased person’s estate if the cumulative value of their debts surpasses the cumulative value of their estate.
That said, creditors aren’t necessarily without recourse if a deceased person’s estate has become insolvent before their debts have been fully paid. In some cases, creditors can pursue non-probate assets, which can include a deceased person’s bank account and the property in their trust, among other things, for repayment of debt. In other words, creditors could contest the beneficiary on a POD account, but they likely would need to obtain a judgment first. A qualified attorney can assist creditors with this process.
Other Grounds
Though we have already covered the most common grounds for contesting the beneficiary on a POD account, there are other grounds on which a contest could potentially be brought.
Other potential grounds for contesting a POD account include:
- Elder financial abuse
- Forgery
- Lack of due execution
- Mistake
- Revocation
Suppose relations between your parent and the designated beneficiary on their bank account became strained during their lifetime. As a result, your parent submitted a written request to their bank to revert their POD account to a standard bank account without a beneficiary. The bank, however, lost your parent’s written notice, resulting in the designated beneficiary liquidating the account after your parent died. Luckily, your parent had tucked away a copy of the request they’d submitted to the bank, which could help you in successfully contesting the POD account.
The other potential grounds for contesting a POD account are self-explanatory; however, if you have questions, a qualified probate attorney can assist.
Is Contesting a POD Account Worth It?
This is the million-dollar question. Unfortunately, we can’t provide an accurate response without knowing more about your case.
With that being said, if you do choose to contest a POD account, keep in mind that it isn’t always easy. It can be difficult to prove to the court that the beneficiary designation on a POD account is invalid. Even if you succeed, it could prove challenging to recover the contents of the account from the designated beneficiary if they’ve already liquidated the account, or worse, spent its funds.
Because of the legal complications such a situation could present, it would not be advisable to go about contesting the beneficiary on a POD account without help from a skilled attorney.
Ultimately, whether contesting a POD account would be worth your time, money and energy would depend on how much money is at stake, whether you have sufficient evidence to prove the beneficiary designation on the account is invalid and whether the proceeds have already been distributed. For example, if an account only has a few thousand dollars in it, your attorney fees would likely be more than the payout you’d receive if you were to win your case.
If you are on the fence about whether to contest a POD account, our probate attorneys can provide guidance. Request a free consultation with them to go over the specifics of your case.
What Happens After a POD Account Is Successfully Contested?
When a POD account is successfully contested, what happens to the account will depend on whether the deceased died with a will or trust that disposes of the account. If they did, their will or trust will determine how and to whom the bank account should pass.
If the deceased died intestate, or without a will, the bank account will likely become a part of their intestate estate and be distributed to their closest surviving heirs in accordance with the intestate succession laws.
Remember, before a POD account can be transferred into a deceased person’s estate or trust, it’s possible its contents will have to be recovered from the designated beneficiary on the account, which, as we’ve already discussed, can present its own set of obstacles. These potential obstacles, however, should not discourage you from fighting for an asset that’s rightfully yours if you stand to financially benefit from doing so.
What Is the Difference Between a POD Account and Survivorship Account?
A survivorship account (otherwise known as a joint account with rights of survivorship) is a type of financial account that is equally co-owned by two or more people. When one account owner dies, the rights of survivorship allow for the other account owner(s) to automatically assume full ownership of the deceased account owner’s share of the account.
In California, with joint accounts, the right of survivorship generally is implied, though the same doesn’t necessarily hold true in other states. Additionally, joint accounts, just like POD accounts, generally bypass the probate process.
Whereas the beneficiary on a POD account cannot access the contents of an account until the account owner has died, joint account owners generally have full use of a survivorship account from the moment they become a joint owner. They can continue using the account until they die, their ownership is revoked, or the account is liquidated.
A beneficiary on a POD account will have to provide documentation to the financial institution where the POD account is housed to both prove their identity and that the account owner has died before they can claim its contents. A joint account owner, on the other hand, can continue using the account even after a joint owner has died.
It’s important to mention that some survivorship accounts are also POD accounts. What this means is that once all the joint account owners of a survivorship account die, the beneficiary designated on the account can claim its contents. The beneficiary, however, cannot claim any portion of the account if any of the joint account owners are still alive.
As you may have already gathered, survivorship accounts are handled in a completely different way from POD accounts upon an account owner’s death. But what about when it comes to contesting joint accounts with rights of survivorship? Can a joint bank account be contested?
Can a Right of Survivorship Bank Account Be Challenged?
Despite joint bank accounts with rights of survivorship being nothing like POD accounts, you can contest joint bank accounts just as you can with POD accounts.
With survivorship accounts, the surviving co-owner of the account is presumed to be the owner of the funds once the first owner dies. However, in California, this presumption can be challenged by introducing clear and convincing evidence that the account holder had a different intent. In other words, you can bring a claim and prove, with evidence, that the deceased account holder did not intend their joint account holder to inherit the account upon their death.
For example, say an adult child placed their parent under duress (a more extreme form of undue influence) to coerce their parent into making them a joint owner on their bank account before their impending death. If you have evidence to suggest duress, you may be able to challenge the survivorship account, resulting in the child potentially being removed as a joint owner, thereby losing all access to the account.
While reading about when a POD account can be contested will help you understand when a joint account with rights of survivorship can be contested, speaking with a knowledgeable attorney about the merits of your case is always the ideal place to start.
What Is the Difference Between a POD Account and TOD Account?
The difference between a POD account and a TOD (transfer-on-death) account boils down to the types of assets each account holds. POD accounts hold liquid assets (i.e., cash), whereas TOD accounts hold other kinds of financial assets, such as stocks, bonds and other investments. Retirement accounts and brokerage accounts, for example, generally are TOD accounts.
Similar to POD accounts, TOD accounts generally bypass the probate process, rendering them readily accessible to the beneficiary designated on the account after the account owner’s death, but not before.
Because of how similar TOD accounts are to POD accounts, you may be wondering: Can a transfer-on-death account be contested? The answer to this question would be yes, but just like with POD accounts, you must have standing and grounds in order to contest a TOD account.
Can a Transfer-on-Death Account Be Contested?
Because a TOD account is handled in a similar fashion to a POD account after an account owner’s death, it should go without saying that a beneficiary on a TOD account can be contested on virtually identical grounds to a beneficiary on a POD account.
Once again, the most common grounds for contesting a designated beneficiary on a financial account include undue influence, fraud, lack of capacity, elder financial abuse, forgery, lack of due execution, mistake and revocation.
If you need help establishing that your contest meets one or more of these grounds, a probate attorney can serve as a great resource.
FAQs: Can You Contest a Beneficiary on a Bank Account?
If you continue to have questions around contesting beneficiaries on financial accounts, we recommend checking out our frequently asked questions below. That said, if you’d rather go directly to the source, our knowledgeable team of probate attorneys is always standing by to help. Fill out our contact form to get in touch.
Does a trust override a beneficiary on a bank account?
In most cases, the designated beneficiary on a bank account takes precedence over the provisions of a trust.
To put it another way, if a trust provides for you to inherit your father’s bank account, but your father had previously converted that same account into a POD account that designates your mother as a beneficiary, it’s more likely that your mother will be able to claim the account. This would hold true even if your father created their trust after designating your mother as the beneficiary on the account.
That said, if you have evidence to suggest the beneficiary designation on the bank account does not represent your father’s true final intentions surrounding the disposal of the account, it’s possible his trust could override the beneficiary on the account. Compelling evidence would include, among other things, that your father executed the trust after designating the beneficiary on the account and identifying the bank account on his schedule of trust assets.
One way to seek the transfer of the account into your father’s trust would be to file what is known as a Heggstad petition, which is a type of 850 petition.
Does a will override a beneficiary on a bank account?
The designated beneficiary on a bank account almost always takes precedence over the provisions of a will. In fact, according to Probate Code section 5302, a will cannot be used to change the ownership of a bank account.
That said, the will can still be used as evidence of a contrary intent on the part of the account holder. If you have evidence to prove the beneficiary designation on a bank account is invalid, the will can be used as evidence to support your claim. You can seek the transfer of the bank account at issue into the account owner’s estate by filing an 850 petition.
Can a spouse override a beneficiary on a bank account?
Though a surviving spouse can’t always override a beneficiary on their deceased spouse’s bank account, there are instances where they can. It depends on whether the assets in the account are characterized as community property or separate property.
If the assets in a deceased person’s bank account were acquired during marriage (with some exceptions), they generally would be considered community property (assets that are jointly owned), regardless of which spouse acquired them and regardless of whether the account is only in one spouse’s name.
As such, if more than 50% of the deceased person’s bank account is designated to pass to a beneficiary other than their spouse, their spouse could potentially override the beneficiary on the bank account, particularly if they weren’t adequately provided for through other means.
That said, the assets in the account were the deceased spouse’s separate property (on account of their having been acquired prior to marriage or by way of gift or inheritance), it’s unlikely the surviving spouse could override the beneficiary on their deceased spouse’s bank account — that is, unless another ground, such as undue influence or fraud, exists for contesting the beneficiary.
How long after distribution can a POD bank account be contested?
As a general rule, you should contest a POD bank account as soon as you discover the beneficiary designation on the account may be invalid.
That said, because the wrongful act is the improper change of the POD beneficiary, the statute of limitations for contesting a POD bank account would take effect on the date of the improper change or the date by which you reasonably could have discovered the improper change.
As for when the statute of limitations would elapse for contesting a POD bank account, it would depend on the cause of action used to challenge the improper change to the POD beneficiary. For example, if the cause of action was elder financial abuse, you would have four years to bring a contest, according to California Welfare and Institutions Code section 15657.7. If the cause was conversion (e.g., someone taking, withholding or blocking access to the bank account), you would have three years to bring a contest, according to California Code of Civil Procedure section 338 (c)(1).
Although there are many more causes of action that could be brought to rectify an improper change of a POD beneficiary, what’s important to remember is that the longer you wait to contest a POD bank account, the more difficult it will be to recover the contents of the account from the designated beneficiary. As soon as the designated beneficiary claims the account, they can start spending its contents. If they’ve spent all its contents, seeking recovery could prove futile.
If you are unsure whether or not a particular POD bank account can be contested and whether doing so would be worth it, you should at the very least discuss the matter with a probate attorney, who can help you decide the best course of action based on your circumstances.
Can someone contest a joint bank account that is also a POD account?
Yes, a joint bank account with a designated beneficiary can be contested in the same way and for the same reasons a standard POD account can be contested.
If you are the designated beneficiary on the account, you will need to prove why the joint account owner(s) shouldn’t have access to the deceased person’s bank account. For example, you may have evidence to suggest they had been subjecting the account owner to elder financial abuse.
In the event you succeed in proving the merits of your case to the court, the joint account owner could potentially be removed as an owner of the account. If there are no other joint owners on the account, this would entitle you, the designated beneficiary on the account, to claim its contents.
Have further questions about when a POD account can be contested? We have answers.
Contesting a beneficiary on a POD, TOD or survivorship account can be more challenging than contesting an estate or trust beneficiary. For this reason, you should not go about this process without a skilled probate attorney by your side.
Your attorney will be able to amass evidence to support your claim and then convincingly present it to the court. Remember, beneficiary designations on bank accounts generally take precedence over will and trust provisions. As a result, overturning them isn’t always easy.
Our probate attorneys can provide you with the guidance and support you need to secure the best possible outcome for your situation. Contact us today to learn how we can help.
