How to Choose a Beneficiary for a Certificate of Deposit

Help loved ones avoid probate by designating a CD beneficiary.

Sound financial planning dictates that you make provisions for your estate in the event of your death. One easy way to avoid probate on your certificate of deposit accounts is to designate a beneficiary who will inherit them. Naming a beneficiary is important because it can provide your loved ones with financial stability when you die.

Learn how to name a beneficiary and why it’s important. Also, learning the implications of inheriting a CD is just as important as knowing how to invest in one.

Why You Need to Name a Beneficiary

Designating a beneficiary not only ensures your CD will not have to go through probate when you die, it extends FDIC or NCUA insurance above the typical amount of $250,000. When you designate a beneficiary — usually as part of the bank’s signature card process — you create an informal revocable trust that directs the bank to transfer your CD funds to the named beneficiary upon your death.

Known as a “payable on death account,” the CD will still belong to you for as long as you live. A POD account enables you to handle everything related to your account as long as you’re alive — and change your beneficiary whenever you want.

More from Your Money

See: What Happens to Your CD Account When You Die

How to Name a Beneficiary

Establishing a beneficiary for your CD account doesn’t require a lot of paperwork, and you can update or change your beneficiary as long as you are alive. After your death, all your beneficiary needs to do is present the bank with a certified copy of the death certificate and proof of identity to access the account. And in many cases the bank will waive the penalty and maturity date requirement for withdrawal in the event of the account holder’s death.

Related: How to Close a Checking Account When a Loved One Dies

When you name a beneficiary for your POD bank account it’s important that you consider who you choose carefully. For many people the beneficiary is a spouse, child or another family member. You can, however, designate your funds to go to anyone you like — or even a charity. Here’s how to change your beneficiary if you change your mind:

  1. Visit your local branch with the name address and date of birth of the beneficiary you are changing or adding.
  2. The teller will add the name of the new beneficiary to your account.
  3. In many cases you’ll be required to fill out a new signature card.

Some banks, especially online banks, will allow you to name a beneficiary when you’re logged into your online account. If you’re not sure how to do that, contact your bank’s customer service line for help.

Related: Find Higher CD Interest Rates Now

Choose Your Beneficiary Wisely

Choosing the right beneficiary requires prior planning. Consider who would need those funds the most after your death. Your beneficiary designation takes precedence over your will, so make sure the two are consistent.

Find Out More: What to Do If You Become the Executor of Your Parent’s Will

About the Author

Mike Parker

Mike Parker is an award-winning freelance writer, editor, publisher and film producer. A serial entrepreneur with business interests in the fields of music, television, theater, film and publishing, Mike has written for such national print and online publications as Vibrant Life, Home & Health, HomeLife, AZCentral, Chron, Clarity, SF Gate and Crosswalk.

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