A POD beneficiary has no rights to money held in your account while you are alive. Your bank cannot allow a POD beneficiary to perform transactions on your behalf, and bankers cannot share any account information with your beneficiary while you are still alive. If you wish to add a friend or relative to your account to assist with day-to-day managing of your money, you must add that person as a joint owner or obtain a power of attorney that gives the person the right to act on your behalf.
State laws on probate and estate settlement vary, but typically when you die your heirs, creditors and other related parties can make claims on your assets. A probate court reviews your will and disburses your assets in accordance with your will. If no will exists, the probate judge decides how to settle your estate. The probate process involves many legal costs and often takes months or years to resolve. However, any accounts you own with a designated POD beneficiary are exempt from probate, and the named beneficiary can access funds without delay.
The Federal Deposit Insurance Corp. provides deposit insurance coverage for checking, savings and money market accounts and certificates of deposit that you hold at FDIC member banks. If your bank files for bankruptcy, the FDIC insures your account balances up to $250,000. If you add a POD to your account, you receive an additional $250,000 of coverage. You can name up to five beneficiaries on one account, which would increase your coverage to $1,250,000.
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Historically, the FDIC enabled account holders to name only a child, grandchild, parent, sibling or spouse as a POD beneficiary. But in 2008 the FDIC relaxed the beneficiary eligibility guidelines. You can now name any living person as a beneficiary. Many people added the names of close friends or life partners to their accounts after this rule change. You can also name a charity or nonprofit organization as your POD beneficiary, but only if it legally qualifies as such an entity under federal tax laws.