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New Case Re: POD Accounts

Posted Thursday, September 20, 2012 by John S. Palmer

Payable-on-death (POD) accounts are payable upon the depositor’s death to one or more designated beneficiaries and are a common way to dispose of property after death.

The Washington Court of Appeals recently issued an opinion clarifying the procedure for courts to follow in circumstances when the proper beneficiary of a POD account is unclear due conflicting information in the bank’s records.

Bank accounts in Washington are subject to the Financial Institution Individual Account Deposit Act, codified as chapter 30.22 of the Revised Code of Washington (and hereafter referred to as the “Act”). In order to comply with the Act, a contract of deposit must be in writing and signed by all individuals who have a current right to payment of funds from an account.

The issue before the court was whether the Act requires a bank to disburse funds from a decedent’s POD account to the beneficiary named in the most recent contract of deposit on file, when other evidence (including the bank’s own electronic records) indicates a different beneficiary was named in a newer contract that has been misfiled or misplaced. The court held that a party relying on a contract of deposit must prove that its terms were memorialized in a writing that meets the requirements of the Act; if such a writing cannot be found, other evidence is admissible to establish that it was prepared and signed.

The case before the court involved a decedent who died in December 2008. After his death, Bank of America disbursed $200,000 to his niece as the POD beneficiary. Three months before his death, the decedent had gone to Bank of America, and a teller made entries into the bank’s computer system to reflect that the niece was now the POD beneficiary of 2 accounts. Although the teller testified that she would only have made these changes if the decedent had signed a new contract of deposit, no such contract could be located after the decedent’s death. Bank of America distributed the funds to the niece anyway, based on its computer records. The personal representative of the decedent’s estate filed suit, but the suit was dismissed before trial, and the estate appealed.

The Court of Appeals said although the bank’s authority to transfer funds from a POD account to a beneficiary depends on the existence of a contract complying with the act, “there is nothing in RCW 30.22.060 that can reasonably be read to suggest that a properly prepared and signed contract ceases to control the rights of the parties if misplaced, misfiled, or even inadvertently discarded by a bank. The ownership and disbursement provisions of the Act depend on the terms of the depositor’s contract and the account designations, with no requirement that the contract be present in the bank’s files at the time of disbursement.”

The court also noted that it has long been held that the contents of a lost or destroyed document may be proven by extrinsic evidence, such as an unsigned copy of the document or oral evidence; and that “several provisions of the Act contemplate that, in the event of a discrepancy between the most recent contract in the bank’s files and other records of the bank that indicate that a different and more recent contract was signed by a depositor, the contract found in the file does not definitively dictate the bank’s duties of disbursement…In light of these provisions, a bank cannot disregard the form of account and terms of deposit reflected in its most recently updated records – here, its electronic records…in deference to physical files it has reason to believe are incomplete.”

The court found that sufficient evidence was presented by both sides to preclude dismissal by motion and remanded the case back to the trial court for trial.

One judge dissented, arguing that Bank of America cannot prove a new contract of deposit exists, and therefore judgment should be entered in favor of the estate.

Estate of Brownfield v. Bank of America, Docket no. 29846-9-III, decided September 9, 2012

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