Texas recognizes different types of multiple party accounts. A multiple party account is one that is in more than one name or has one or more signatories. There is a great deal of confusion as to the ownership of the accounts and who becomes the owner of an account in the event of the death of one party.

The following are representative of multiple party accounts: 1) An “or” account in more than one name “without right of survivorship;” 2) An “or” account in more than one name “with right of survivorship;” 3) An account in one person’s name; 4) An account in one person’s name but with another person authorized to sign on the account as a “convenience” signer; 5) An account in one person’s name but containing a designation of “POD” for another person; and 6) An account in one person’s name but containing a designation of “ITF” for another person; and 7) An account in the names of two persons with a third party named as the “POD beneficiary” of the account..

Before proceeding, it is very important to know that the signature card for an account is what determines the type of account. In addition to the signature(s) required for the account, the signature card will disclose the type of account. Anyone opening a bank account should inquire as to the type of account that is being opened so that there is no future misunderstanding.

Account in name of two individuals “without right of survivorship.” The word “or” separates the names of the two individuals. This is an “or” account and is often mistakenly thought to be a “survivorship” account; but it is not a survivorship account. Both individuals are considered owners of this account to the extent of their respective contributions to this account. While both are alive, either may deposit or withdraw from the account. At one individual’s death, the deceased individual’s ownership of the account does not automatically pass to the surviving depositor; a survivorship account is not inferred merely because of the word “or” between the names of the two individuals. What creates confusion is that the bank is allowed to honor checks written by the surviving individual, but that fact does not mean that the surviving individual owns the account.

Account in name of two individuals “with right of survivorship.” The two individuals are considered owners of this account to the extent of their respective contributions to this account. While both are alive, either may deposit or withdraw from the account. At the death of one individual, the ownership of the deceased individual to the account passes to the surviving individual. If there are three parties to the account, and one dies, the account passes to the two surviving parties to the account.

Account in one person’s name. At that individual’s death, the ownership of the account passes by the decedent’s will or, if there is no will, by intestate succession as established by the State of Texas.

Account in one person’s name with another person designated as a “convenience signer.” Although the convenience signer may sign on the account, the convenience signer has no ownership in the account. At the death of the account owner, the ownership of the account passes by the account owner’s will or, if the account owner has no will, by intestate succession as established by the State of Texas. This type of account is increasing in popularity.

Account in one person’s name with a POD designation for another person. This is a “pay on death account” and is only owned by the person who owns the account. The person designated as “POD beneficiary” has no ownership whatsoever in the account until the account owner dies, at which time the POD beneficiary becomes the owner of the account. The owner of the POD account may make changes to the account at any time prior to the account owner’s death, including the removal of the POD beneficiary.

Account in one person’s name with an ITF designation for another person. This is an “in trust for account” and is owned by the account owner. The ITF beneficiary has no right whatever in the account until the account owner’s death, at which time the ITF beneficiary becomes the owner of the account. Like the POD account owner, the owner of the ITF account may discontinue the account, pledge the account for a loan, and change the account designation at any time prior to death.

Account in the names of two persons with right of survivorship, but containing a designation of “POD” for their church. At the first depositor’s death, the second depositor will become the owner of the account, and may discontinue the account, pledge the account for a loan, and change the account designation at any time prior to that depositor’s death. The church has no vested right or ownership in the account (assuming it remains unchanged) until both of the account owners are deceased.

Banker Phares is a practicing attorney and founding member of the Estate Planning and Probate Law certification by the Texas Board of Legal Specialization. He is the John and Karen Mast Professor at SFA and teaches in the Department of Economics and Finance.

Banker Phares is a practicing attorney and founding member of the Estate Planning and Probate Law certification by the Texas Board of Legal Specialization. He is the John and Karen Mast Professor at SFA and teaches in the Department of Economics and Finance.

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