When most people think about designating who’ll inherit their financial assets when they die, preparing a will comes immediately to mind. But for deposit accounts, naming a beneficiary can more easily and cost effectively transfer your funds to a new owner.
Most banks and credit unions allow you to name one or more beneficiaries for any checking, savings, money market or certificate of deposit account. The legal term for this is “payable on death”, and you might see it referred to as POD. Beneficiaries can also be designated for U.S. savings bonds.
When you specify a beneficiary, you still retain all ownership and rights associated with that account as long as you live. But when you die, the beneficiary becomes eligible to take possession of those funds as their own.
The advantage is that POD designations prevent those funds from entering the probate process of settling your estate, which can be costly, lengthy and burdened with paperwork. Instead, beneficiary designations override any will and are easily settled, at no cost. The beneficiary simply has to provide the financial institution with proof of identity and a certified copy of your death certificate.
Naming beneficiaries can be done immediately upon opening a bank account, via the signature card. But if you neglect to do this at the outset, you can always add a POD designee later. You’re also free to remove and change beneficiaries any time you like, though a new signature card will be required with each change.
Naming beneficiaries for your deposit accounts is one way to provide a gift to those who inherit your assets, as it significantly reduces the paperwork, time and energy necessary to make the transfers. But be sure to periodically review your various designations to ensure they remain up to date with your current preferences.