Does Tenants by Entireties Survive Pay on Death Designation?

Opening a tenants by entireties account at a financial institution can be complicated as there are many legal pitfalls on the path to a protected entireties account. The court in one bankruptcy case (In re Givans) held that conveying an entireties bank account to a joint revocable living trust forfeits entireties protection because, among other things, the trust names children as future beneficiaries. The court said that entireties ownership requires that the married couple jointly and exclusively own the subject asset, and that the beneficiary designation creates an equitable interest in property held by parties other than the married couple.

Living trust estate plans are not the only way to designate future interests in entireties accounts. A “pay on death” ( POD) account designation also states who acquires the account interests after the deaths of the initial joint owners. After the death of the account owners, the financial institution pays the money in the account to the designated beneficiaries. Many married couples with children open an entireties account with a POD instruction. The account could read, for example: “husband and wife, tenants by entireties, POD children.”

No Florida court has considered whether the POD instruction gives the children an equitable interest in the account sufficient to dilute the parent’s joint interest and forfeit entireties protection. A judgment creditor could argue that under the reasoning of the cited bankruptcy law, the parents do not have exclusive ownership because they have given their children a future beneficial interest.

In my opinion, a POD designation added to an entireties account does not affect entireties ownership or protection from creditors. A POD designation is not the grant of a future beneficial interest, but is a directive to the financial institution. The designation tells the financial institution what to do with the account when the owners die. Also, an account with a POD designation is similar to reservation of a life estate interest; life estates are reserved in estate planning tools, such as lady bird deeds. Life estates can be titled as tenants by entireties.

Therefore, I think that a pay-on-death designation does not affect the clearly established entireties designation during the married couples’ joint lives, and it does not dilute or modify the entireties protection from either spouse’s individual creditors.