+1There are some pretty strict Treasury "know your customer" and reporting requirements designed to detect money laundering. You may have run into these. Also, the IRS wants 1099s for any future income that might go to your PODs, so that is probably another reason.
So you have to tell people they're your beneficiary and ask them for their SSNs in order to leave your money to them via a POD designation?
That's what I had to do. Ask people for their SSANs. To give to a bank they never heard of. Crazy!
All of ours are spouse and daughter, so we know the SSNs, but what if I wanted to leave money to a niece or a friend and notify them via letter after I pass?
I'd be shocked if there's an actual law that requires a beneficiary to provide PII (personally identifiable information) to a bank that she isn't a customer of, and I suspect this is just a common bank policy rather than a matter of law. The bank doesn't have to report beneficiary info to the IRS. When someone shows up to claim the account they must collect the SSN in order to transfer it to the new owner and then any tax reporting will happen under the new owner's SSN, but they have no legal need for it before that. I suspect they're just using the SSN to try to avoid liability for transferring the account to your niece Jane Smith when you meant for it to go to your sister Jane Smith.
I suspect you are correct. It's like a big CYA tactic they came up with in the past... 10-15 or so years for some reason (Anti-terrorism? I guess that'll do.)
I know I had one person already as a beneficiary for an IRA and some I bonds fore years and years. I just needed to put their name and, I think, relationship on the paperwork. When I went to POD (what's the diff?) I needed the SSAN. They said it was required by law (The Government) but it just smelled too funny.
What alternate form of ID do folks propose that positively guarantees the bank will turn over the money to the correct John Doe?
Someone's name is ALSO PII.
If your beneficiary's info is not safe at your bank, neither is yours.
Again, how do you propose they find a beneficiary without that person being identified?Correct, but I can decide whether or not to trust someone with my own PII. It's their asking for the information of a 3rd party with whom they do not do business (and may never do business with, if I close the account before I die) that's fishy.
What alternate form of ID do folks propose that positively guarantees the bank will turn over the money to the correct John Doe?
As long as a bank does the basic due diligence
I'd be o.k. with a law that says they can't be sued for handing over the money to the wrong person.
essentially putting the burden on you.
Several years ago, an employee of mine passed away when he fell asleep behind the wheel after working midnight shift. There were no less than 10 people who showed up within 48 hours to claim his life insurance and pension benefit. They came to HR, and when they didn't like their answer, they went to superintendent, and when they didn't like their answer, they went to corporate. I'm sure all 10 new his name, birth date and their relationship to the deceased.
Again, how do you propose they find a beneficiary without that person being identified?
I do not see the fishiness.
Name, birth date, relationship to the deceased should suffice. It's worked for quite a long time. As long as a bank does the basic due diligence to verify name and birth date and requires a copy of the death certificate, I'd be o.k. with a law that says they can't be sued for handing over the money to the wrong person.
Do banks actually make an effort to find a beneficiary though? It's my understanding that if a beneficiary doesn't show up and claim an account then it just escheats to the state after some period of dormancy. The bank will try to reach the account holder by mail, but if nobody responds, how would they even know the person is dead?
Also, even if you know someone's SSN, how do you locate that person? Are you allowed to pull their credit report without their permission? Or can you ask the government to provide you with the last known address from their tax return (or parents' tax return for a minor)?