A certificate of deposit account is an instrument that gives you mid-to long-term stability as an investor. When compared to other savings vehicles such as mutual funds or stocks, CDs are one of the most secure investments on the market. Their interest rates are not usually tied to fluctuating market patterns, and they are usually insured by the federal government. Since they are easy for a beginning investor to use, and have a slightly higher interest rate than a traditional savings account, they are generally considered a good step toward investing in your own financial security.
Certificate of Deposits Are Less Accessible
However, unlike saving accounts, CDs are more difficult to convert and harder to move from institution to institution. Therefore, CDs are not as accessible as another savings vehicle might be. You just have to wait until the certificate of deposit matures, or borrow against your CD if you have a financial emergency.
Death Before Certificate of Deposit Maturity
But what happens if you die before your CD matures? Like any other asset, you will want to make sure that your estate is able to access that money in the event that something happens to you. If you can’t afford a lawyer, or if you just want to avoid having the CD end up in probate, you can create a beneficiary for your CD. It’s a fairly simple process that doesn’t cost anything.
Adding a “Payable On Death” Term to Your CD
First, find out from your financial institution whether you can add a “POD” onto your account. The term payable on death can be added to any type of bank account, including a certificate of deposit. Ideally, you should add a POD when you open the account, but if you haven’t done so, you may still have the option to do so later. If your bank cannot add a POD to the CD in the middle of your certificate of deposit term, be sure to schedule an appointment for when the CD comes due.
To add them as a POD, you will need certain pertinent information about your beneficiary, such as their social security number and date of birth. You might also double-check their full legal name.
Finally, don’t forget to round up the numbers of your COD accounts that have a POD on them, along with the relevant info such as where the account is located, and keep this list with your will and other important legal documents. You’ll want to be sure to keep this list up to date. With a little pre-planning, you can ensure that the financial future is bright for you and your beneficiaries. For more information on what to do if you are a CD beneficiary, we’ve compiled some tips for CD beneficiaries.
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