When you open up most investment accounts, the firm generally asks who you want to name as your beneficiary. Remember, a beneficiary is someone who the account holder names to benefit or take advantage from the account after the holder dies. Beneficiaries can be named for individual retirement accounts (IRAs), mutual funds, annuities, and life insurance policies.
But what about checking accounts? Most people use these accounts to deposit their paychecks and other benefits, along with doing their everyday financial transactions like paying their bills, rent, mortgage, and other obligations.
The process of having your assets passed down after your death can be a complicated process, especially when you may not be able to name someone as a beneficiary. Read on to find out how you can add a beneficiary to a checking account.
- Checking accounts don't necessarily require account holders to name a beneficiary.
- Many banks offer payable-on-death (POD) accounts as part of their standard offerings.
- A POD account instructs the bank to pass on a client's assets to the beneficiary, which means money in a POD account is kept out of probate court if the account holder dies.
- After a beneficiary is chosen, the bank fills out paperwork so funds pass directly to the beneficiary after your death.
Do Bank Accounts Need Beneficiaries?
Unlike other accounts, banks do not require checking account holders to name beneficiaries. Even though they're not needed, you should consider naming beneficiaries for your bank accounts if you want to protect your assets. If a person wants to name a beneficiary for their checking account in the event of death, the account holder should pass along the name of the person to their bank.
Due to increasing interest, many banks offer their customers payable-on-death (POD) accounts as part of their standard offerings. So checking accounts can be converted into a POD account, which instructs the bank to pass on all the client's assets over to the beneficiary. The money in a POD account is kept out of probate court if the account holder dies.
The money in a POD account is kept out of probate court if the account holder dies.
POD Accounts for Beneficiaries
To convert a checking account into a POD account, choose a beneficiary and notify the bank of your wishes. The bank fills out the appropriate paperwork so your account's funds will pass directly to the beneficiary after your death. You may wish to convert your checking account to a POD account if you want someone specific to receive the account's funds.
Under normal circumstances, the money in a bank account becomes part of a person’s estate when they die. However, POD accounts bypass the estate and probate process. To claim the money, the beneficiary simply has to show up at the bank, prove their identify, and produce a certified copy of the account holder’s death certificate.
What Happens if You're Married?
Married checking account turned POD-account holders in community property states should be aware that their spouses automatically get half the money they contributed during the marriage, even if another beneficiary is named after the account holder passes away. Meanwhile, spouses in non-community property states have a right to dispute the distribution of the funds in court.
If you don't have the option of a POD account, consider a joint account holder on your checking account. This may be a spouse or a child. Simply go into your bank branch and ask to put on another name onto the account. Make sure that person is with you because they'll have to sign all their paperwork.
One of the advantages of having a joint account holder is there is no need to name a beneficiary, since the person's name is already on the account. That person will have access and complete control over the balance. One of the disadvantages, though, is that you have to share the account with that person, who may be financially irresponsible and leave you in a lurch.
But remember, even though you may name a beneficiary or name a joint account holder, you should still have a will. This will take care of all your affairs, even if your accounts already have beneficiaries.