The status of the parties you inquire about is affected both by the laws of the state in which the bank holding the CD is located and the deposit contract between the three owners and the bank. First, one would have to review the law permitting the opening of deposits using a "payable on death" or POD registration or designation. That law, if it exists in your state, will determine whether, for example, joint owners of an account may designate a payable on death beneficiary, and whether any one of the owners may revoke such a designation, or if it requires all owners to act. It also will determine when the ownership of the account will vest in the beneficiary, ordinarily it will be upon the death of the last surviving co-owner.|
The law also will determine what happens if the designated beneficiary dies before ownership is transferred to him or her. Depending on the law, ownership could end up with the estate of the last surviving co-owner, or it could go to the estate of the beneficiary.
If the state in question does not recognize payable on death account ownership, there can be a real problem determining the rights of the various parties. POD designations are not recommended unless state law recognizes them.
Without knowing which state laws apply and how the deposit contract reads, it's not possible to know the legal standing of the parties involved. There are two places you can go for some help. First, to the institution holding the account. It should know what state law applies, and certainly should have a copy of the deposit contract. If reading that information doesn't give you the answers you need, take the question to an attorney.
Published on BankingQuestions.com 11/25/08