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Court finds handwritten note not enough for payable-on-death account

Judge Jean DiMotto retired in 2013 after 16 years on the Milwaukee County Circuit bench and now serves as a reserve judge. She also is of counsel with Nistler Law office SC. She can be reached at jeandimotto@gmail.com

Judge Jean DiMotto

Todd Mueller had a terrible, horrible, no good, very bad day in court. He walked into the Winnebago County Courthouse hoping to be declared the beneficiary of $200,000, but walked out with nothing.

He had sued Thomas Edwards and Martina Welke arguing that he was the rightful beneficiary of money his neighbor had deposited in a payable-on-death account at US Bank.

An account of this sort, also known as a P.O.D., directs a financial institution to pay the account funds to named beneficiary(ies) upon proof of the depositor’s death.

“Prior to the depositor’s death, the depositor maintains control over the principal and income of the accounts and can change the P.O.D. recipient at any time.”

The named beneficiaries on the Mueller’s neighbor’s P.O.D. account were the defendants, Edwards and Welke.

The handwritten note

But after his neighbor’s death, Mueller found a dated, handwritten note in his neighbor’s safe. The note listed seven financial institutions and the type of account, amount in the account, and the purported beneficiary of the account.

The note further indicated that all the accounts were P.O.D. accounts and that the accounts “are recorded on all the P.O.D. documents at the banks and credit unions.”

Mueller was listed as the beneficiary on six of the seven accounts, including the account at US Bank that was the subject of the lawsuit.

However, Mueller’s neighbor never filed or provided his note to US Bank before his unexpected death three months later.

Circuit court activity

Winnebago County Circuit Judge Daniel Bissett held a court trial to determine the outcome of the dispute about who was the proper beneficiary of the US Bank account. The note was introduced into evidence, as was the signature card on file at US Bank listing Edwards and Welke as the beneficiaries.

Judge Bissett ruled in favor of Edwards and Welke.

Mueller appealed.

Court of appeals

The District II Court of Appeals, in an opinion from Judge Paul Reilly, disagreed with Mueller’s argument that although the note was “surprising and unconventional,” it was a valid designation for a P.O.D. account beneficiary.

P.O.D. accounts are governed by subchapter 1 of ch. 705 of the Wisconsin Statutes. There, a P.O.D. account is described as a “contract … between a depositor and a financial institution” concerning a deposit of funds.

A beneficiary is defined in part as “a person designated on a P.O.D. account” to receive some or all of the account after the depositor’s death.

Reilly wrote that the plain meaning of these two definitions is that the depositor and bank form a contract concerning who the designated beneficiary on the P.O.D. account is.

“A separate writing not filed by a depositor with a financial institution is ineffective to alter a P.O.D. beneficiary designation under … ch. 705.”

Thus, Mueller’s neighbor’s note, found in the neighbor’s safe but not filed at US Bank, is an ineffective change in beneficiary.

Mueller also argued that a subsection in subchapter 2 of ch. 705 allowed for a beneficiary to be listed in a separate document.

The court easily rejected this contention, pointing out that a canon of statutory construction is that “if two or more statutes are in conflict, the more specific statute controls over the general statute.”

Subchapter 1 of ch. 705 deals specifically with P.O.D. accounts, and thus controls the question in this lawsuit.

Commentary

This decision is straightforward and succinct.

It affects us on a number of fronts. The first is in any litigation on the same issue.

The second front is estate-planning work with clients.

The third is in our own backyards. As the aging population continues to grow, we increasingly are called upon to assist aging family members, relatives, neighbors and friends.

The case makes clear that P.O.D. accounts, while providing non-probate convenience to beneficiaries, must have an accurate, up-to-date designation of beneficiary(ies) filed with a financial institution.

A change of heart requires a change of filing, not just a stated or written intention stored away at home.

After all, the depositor is only one of the parties to the contract involving a P.O.D. account. The other is a financial institution.

To effectuate a depositor’s wishes, the filing with the financial institution needs to reflect the depositor’s current intentions.

Judge Jean DiMotto retired in 2013 after 16 years on the Milwaukee County Circuit bench and now serves as a reserve judge. She also is of counsel with Nistler Law office SC. She can be reached at jeandimotto@gmail.com.

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