CBT Account Opening and Maintenance 2 — Questions and Answers
Question 1: A 'Payable on Death' (POD) or 'Transfer on Death' (TOD) designation on a bank account does what?
- Freezes the account immediately upon the owner's death
- Transfers the account balance directly to named beneficiaries upon the owner's death without probate (Correct answer)
- Requires a court order to release funds to heirs
- Converts the account into a trust account
Correct answer: Transfers the account balance directly to named beneficiaries upon the owner's death without probate
POD/TOD designations allow account balances to pass directly to named beneficiaries upon the account holder's death, bypassing the probate process.
Question 2: What is a 'dormant account' in banking?
- An account with a zero balance
- An account with no customer-initiated activity for an extended period (typically 1–3 years depending on state law) (Correct answer)
- An account that has been closed by the bank
- An account under investigation for fraud
Correct answer: An account with no customer-initiated activity for an extended period (typically 1–3 years depending on state law)
A dormant account is one with no customer-initiated transactions for a set period; if it remains inactive longer, it may be reported to the state as unclaimed property.
Question 3: What is 'escheatment' in banking?
- The process of closing overdrawn accounts
- The transfer of unclaimed property (like dormant account funds) to the state government (Correct answer)
- Charging a monthly maintenance fee on inactive accounts
- Converting a personal account to a business account
Correct answer: The transfer of unclaimed property (like dormant account funds) to the state government
Escheatment is the legal process by which banks turn over unclaimed property, such as funds in dormant accounts, to the state after a statutory period of inactivity.
Question 4: Under Regulation E, what is the time limit for a customer to report an unauthorized electronic funds transfer to limit their liability to $50?
- 24 hours after discovery
- 2 business days after learning of the loss or theft (Correct answer)
- 30 days from receiving the statement
- 60 days from the transaction date
Correct answer: 2 business days after learning of the loss or theft
Regulation E limits liability to $50 if the customer reports the unauthorized EFT within 2 business days of learning of the loss or theft of their access device.
Question 5: What type of account is a 'Health Savings Account' (HSA) designed for?
- General emergency savings with higher interest rates
- Tax-advantaged savings to pay for qualified medical expenses, paired with a high-deductible health plan (Correct answer)
- Savings accounts specifically for senior citizens
- Interest-bearing accounts managed by healthcare providers
Correct answer: Tax-advantaged savings to pay for qualified medical expenses, paired with a high-deductible health plan
An HSA is a tax-advantaged account available to individuals enrolled in a high-deductible health plan (HDHP), used to pay for qualified medical expenses.
Question 6: When a customer presents a legal document granting another person authority to manage their financial affairs, this is called a:
- Notarized affidavit
- Power of attorney (Correct answer)
- Trust agreement
- Joint tenancy agreement
Correct answer: Power of attorney
A power of attorney (POA) is a legal document authorizing one person (the agent) to act on another's (the principal's) behalf in financial matters.
CBT Account Opening and Maintenance 2
A 'Payable on Death' (POD) or 'Transfer on Death' (TOD) designation on a bank account does what?