Don't Renew That CD

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Question:

A customer opened a CD with 3 beneficiaries. The customer died prior to maturity. The beneficiaries want to renew the CD under the original customer' name and TIN and have the interest paid to one of the beneficiaries. Can the bank renew a CD in a deceased persons name or should it be renewed in the name of the estate or the name of the beneficiaries?

Answer:

The beneficiaries you described will not be able to do what they propose. It is not permissible for a CD to be renewed in the name of a deceased individual and using that individual's TIN. Once an individual has passed away, they can no longer earn interest, for one thing, so even if the CD was in one person's name with no beneficiaries, at the very least the CD would have to be retitled in the name of their estate and the estate would be the payee of the interest.

In this instance, however, since there are beneficiaries, I assume you are saying this was held POD. If that was the case, then at the moment of death the deceased individual ceased to have any ownership interest and the CD became the property of the beneficiaries. It would be legally incorrect to have it reflect the name of the deceased owner.

First published on BankersOnline.com 1/15/01