How does the death of a beneficiary of a POD account (informal revocable trust) affect insurance coverage?
There is no grace period if a beneficiary (or all beneficiaries) of a POD account passes away. Insurance coverage for the deposits in the account would immediately be reduced. For example: A mother has deposited $500,000 in a POD account at an insured bank with her two children named as the beneficiaries (the children have equal beneficiary interests) in the account records of the bank. While the owner and both beneficiaries are alive, the account is insured up to $500,000. Upon the death of one beneficiary, the mother’s deposit insurance coverage in the POD account is immediately reduced to $250,000 and $250,000 is uninsured.
