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Protecting Your Money: Make Sure Your "POD" Is In Place

Washington Mutual's headquarters in Seattle.
AP
Washington Mutual's headquarters in Seattle.

I got an email from DG, who did a lot of legwork in making sure his deposits at Washington Mutual are insured.

If you'll recall, during the Indymac failure, many people didn't realize their accounts weren't structured in such a way that all the money was insured.

A reminder: the FDIC only insures up to $100,000 per depositor (not per account but per individual) per bank. So if you want to insure amounts above that, you need to structure accounts in different ways--$100,000 for you individually, more in a joint account with a spouse, and more in a Payable-on-Death (POD) trust account with beneficiaries.

So DG wrote me:
"Yesterday I opened a 13-month 5% CD at WAMU with certain POD Designations. Then I thought ok...why don't I put additional amount into my WAMU Savings account at 3.75%. The total of those accounts put me over the standard 'Single Holder' $100K status and therefore wanted to be double sure that I had my Beneficiaries established correctly. So...I went to the FDIC website and read the 'Informal Revocable Trust' document. This document applies to, 'anyone' who expects to protect funds over 100K through the use of POD's."

What DG learned, and this is important, is that if you have one of these accounts, the letters "POD" must be in the account title for it to be insured as such in case of a bank failure. In other words, without "POD" in the account title, the account may end up being added to your other individual deposits at that bank, and anything over $100k won't be insured. DG's trust account had POD listed in "beneficiaries," but not in the account title.

And when he went to WaMu to change it, DG says the bank personnel he dealt with disagreed with him. He stood firm, and it took a call to the FDIC to prove him right. However, even after the change was made, and "POD" was added to the title of DG's account, it appeared on the bank's computer correctly but would not print out with "POD" in the title box on his Customer Copy. He refused to leave until that was fixed, too. Here's what he found on the website.

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The lesson here may be that you can't expect anyone to make it easy for you to protect your money. You have to do it yourself.

DG writes: "I guess the FDIC is just like any Insurance Company. If the Policy has holes in it, and you don't ask about it, then your Insurance Agent (the Bank in this case) is not necessarily obligated to cover every word of the policy with you. It sure brings a whole new meaning the the catch phrase -The FDIC Has Never Not Paid A Single 'Insured' Dollar."

On a separate note, a very good friend is in critical but stable condition after the horrific train crash here in Los Angeles. She is a strong young woman who took quite a beating, but she should recover. The current situation requires patience and prayer. Please keep the survivors, and the families of the dead, in your thoughts.

Questions? Comments? Funny Stories? Email funnybusiness@cnbc.com