Renewal for CD Beneficiaries

Some people may invest their money in order to provide for someone after they are gone. Since many people invest their money in certificates of deposit, more commonly referred to as CDs, the payable on death CD option was created, in order to designate a CD beneficiary.

When you assign this CD beneficiary, you can choose exactly where the money is going in case of a sudden death. This CD beneficiary supersedes any beneficiary information as stipulated by the will of the deceased (More on will beneficiaries vs. CD beneficiaries).  By getting the best CD rates possible and naming a beneficiary to your CD, you’re really getting a valuable and safe investment with added benefits.

Basics of CD Beneficiaries

When someone is named the beneficiary of a CD, it means it will come to them when it matures, if the buyer is deceased. The buyer of the CD can change any parameter of this beneficiary designation as long as he owns it.

The buyer of a CD owns it until it matures, or until the bank calls it (prematurely paying out the CD at the bank’s discretion). If the CD is in your name as the beneficiary, and the bearer of the CD has passed away without changing any of the parameters of the beneficiary designation, then the funds will come to you. At that point, you can decide whether or not to renew the CD (if renewing, get the best CD rates possible versus the current rate), if the bank permits it.

If you are a CD beneficiary faced with the decision to renew, here’s the steps you should follow:

  1. Check with the bank to clarify their policies on renewing the account for a new term.
  2. Educate yourself. If you’re new to interest-bearing accounts, make sure you understand the definition of a certificate of deposit and how they differ from other accounts.  You may also want to get a thorough understanding of what taxes you may owe as the CD beneficiary.
  3. Make sure you know what rates you’re going to get by shopping around for the best rates (our CD rates tables can help you find a great local rate).
  4. Make your decision on whether to renew or rollover the funds into a different type of investment account.   Now might be a good time to consider setting up a CD ladder.

More on Certificate of Deposit Beneficiaries

To learn more about renewing a CD as a beneficiary, CDs in general, and other investments, be sure to speak with a financial advisor. He or she will walk you through the details concerning all your questions. As always, there will be some risk in your investment. By making sure you know the terms of your CD and that you’re getting the best CD rates available, you should do fine.