I received an interesting question about the difference for asset protection purposes between bank accounts titled “ITF”, or in trust for, and bank accounts titled “POD”, pay on death. An example of each account title would be as follows: “John ITF Mary” and John POD Mary. Both accounts are set up by John and funded with John’s money. In both cases, when John dies all the money in the accounts passes to Mary outside of any probate of John’s estate. The writer reported that one Florida bank permits only ITF accounts whereas a different Florida bank uses only POD accounts. Does the choice of these two titles make any difference in terms of protecting the money from John’s creditors during his lifetime.
Here’s my understanding, although I know of no cases comparing the two types of accounts.. ITF , “in trust for” implies the existence of a trust relationship so that the beneficiary of the trust (Mary) would have equitable ownership in the account funds from the day John funds the account. . Of John opened a POD account Mary would have no rights or interest in the account during John’s life, and Mary would first acquire an interest upon John’s death. From an asset protection standpoint, John is a trustee over Mary’s money during his life in the case of an ITF account, and John has no equitable ownership in the money which would be vulnerable to his creditors.
Creation of the ITF account is an immediate gift in trust to Mary. If John’s POD account John has a life estate in the account and the beneficiary has a remainder interest. During his lifetime John has full access to money in his POD account; Mary’s interest is limited to what is left in the POD account upon John’s death.. Because John can access for his own use money in a POD account during his lifetime I expect that John’s creditors could attack money his POD account as they can get whatever rights John has in the POD account. For that reason, I believe an ITF account provides better asset protection as well as probate avoidance.