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WI Court of Appeals: A Separate Writing Not Filed with Financial Institution Ineffective to Alter a P.O.D. Beneficiary Designation

On October 25, 2017, the Wisconsin Court of Appeals addressed whether a beneficiary designation on a P.O.D. account under Wis. Stat. ch. 705 may be controlled by a writing that is separate from the contract of deposit between a depositor and his or her financial institution.   In Mueller v. Edwards, 904 N.W. 2d 392 (Wis. Ct. App.  2017), the court ruled that a separate writing not filed by a depositor with a financial institution is ineffective to alter a P.O.D. beneficiary designation under Wis. Stat. ch. 705.

In this case, depositor Robert Zernzach deposited $200,000 in a certificate of deposit (CD) with US Bank in November 2013, naming defendants Thomas Edwards and Martina Welke as P.O.D. beneficiaries.  The designation was made via a US Bank signature card.  Mr. Zernzach died unexpectedly on June 21, 2015.  Plaintiff Mueller, a neighbor and friend of Mr. Zernzach, claims that on March 6, 2015, Mr. Zernzach changed the beneficiary designation on the CD account via a handwritten note found in Mr. Zernzach’s safe after his death.  The note listed seven financial institutions, the type of account, amount of the account, and the purported beneficiary of the account.  Mueller was listed as a beneficiary on six of the seven accounts, including the US Bank CD account.  The note also stated that “[t]hese are all P.O.D. accounts” and “these accounts are recorded on all the P.O.D. documents at the banks and credit unions.” This note was never filed with US Bank by Mr. Zernzach.

In affirming the circuit court, the Wisconsin Court of Appeals found Welke and Edwards to be the owners of the proceeds from the P.O.D. account.  By interpreting the “plain language” of Wis. Stat. §705.01, the court concluded that a P.O.D. beneficiary designation is “a contract between the ‘financial institution’ and ‘depositor’ in which the depositor and financial institution agree that a P.O.D. beneficiary is ‘a person designated on a P.O.D. account’”.    According to the court, the P.O.D beneficiary must be named in the account records of the financial institution.  This allows the financial institution to properly pay the proceeds upon the depositor’s death, as directed in the contract.  Thus, a separate writing not provided to the financial institution does not meet the statutory requirements and is ineffective to modify existing P.O.D. beneficiary designations.  Consequently, the note left in the safe by Mr. Zernzach could not operate to change the beneficiary designation on the US Bank CD account.

In making its ruling, the court rejected the argument that Mr. Zernzach’s note was enforceable under Wis. Stat. § 705.10 which “specifically enforces beneficiary designations that are made ‘in a separate writing’ from the account agreement.”   The court pointed out that this provision is contained in subchapter two of ch. 705, which addresses nonprobate transfers on death in certain instruments.  P.O.D. accounts are expressly addressed in subchapter one of ch. 705.  The more specific provisions in subchapter one of ch. 705, which expressly address P.O.D. accounts, control this case.

This case validates the policies and procedures of banks to obtain a revised or new designation from a depositor when altering P.O.D. beneficiaries.   If a Bank receives a separate writing from an alleged beneficiary not named on the P.O.D. account, the Bank should seek advice of counsel. 

DISCLAIMER: The information provided is for general informational purposes only. This post is not updated to account for changes in the law and should not be considered tax or legal advice. This article is not intended to create an attorney-client relationship. You should consult with legal and/or financial advisors for legal and tax advice tailored to your specific circumstances.

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