How to Add a Beneficiary to Your Bank Account

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Designating a beneficiary for your bank account can help you easily pass the money in your account to a loved one. If you don’t have a beneficiary when you pass away, the money can get tied up in probate. This can be a time consuming and costly process for your loved ones.

Here’s what you need to know about adding a beneficiary to your bank account.

Bank Account Beneficiary Rules You Should Know

Different types of accounts may have unique guidelines for adding beneficiaries. On top of that, bank policies can vary, so it’s always a good idea to double-check with your financial institution. Some common rules:

• Not all banks allow multiple beneficiaries. If you want the money spread equally between multiple people, like your children, consider setting up a trust.
• You can update your beneficiary at any time.
• Your beneficiary has to be over 18 years old. You may have to use a custodial account to make a minor your beneficiary.
• Your beneficiary could override what is in your will. Make sure you keep your beneficiary updated when you change your estate plans.
• Accounts with no beneficiary could go into probate. This can tie your money up for several months and require your loved ones to pay legal fees.
• You can’t put any restrictions on how your beneficiary spends the money they inherit. If you’d like your money to be used in a specific way, consider a trust.
• You can set up a secondary beneficiary in case your primary beneficiary dies before you do.
• Your beneficiary doesn’t have to be a person. You can also designate a charitable organization.

While many states follow similar practices, there can be differences in how accounts are handled if you die. Some states even have specific forms or requirements to ensure your beneficiary designation is valid.

How To Add a Beneficiary to Your Bank Account

Because banks can have different processes for naming a beneficiary, you’ll need to read your bank’s rules. Banks often refer to accounts with beneficiaries as one of the following:

• Payment on Death or POD
• In Trust For
• Transfer on Death or TOD
• Totten Trust
• Transfer on Death account

For retirement and investment accounts, you can usually add a beneficiary online. For checking and savings accounts, banks like Wells Fargo and Bank of America require you to make an in-person appointment with your beneficiary for any changes.

What Happens When a Beneficiary Is Added to a Bank Account?

Your beneficiary won’t have any access to or control over the account while you’re alive. The account remains entirely yours to manage. Once you pass away, the beneficiary can step in, but only after providing the necessary proof, like a death certificate, to the bank.

At that point, the beneficiary gains access to the funds without the account having to go through probate, which can make the process quicker and easier.

It’s a simple way to make things smoother for your loved ones during a challenging time.

Common Mistakes When Adding a Beneficiary

Naming a beneficiary might seem like a set-it-and-forget-it task, but there are some common mistakes to watch out for.

• Double-check the details. A small typo in a name or an outdated address could lead to confusion later on.
• Specify percentages if you’re naming multiple beneficiaries. This can prevent unnecessary headaches after your passing.
• Check your beneficiary information after a life change. Marriage, divorce or the birth of a child can affect your choices, so review your designations regularly.

How to Remove or Change a Beneficiary on Your Bank Account

There are plenty of reasons to update a beneficiary. A divorce, the passing of a loved one, or even a change in your financial priorities could make an update necessary.

Start by:

1. Contacting your bank to find out their policy for updating beneficiaries
2. Fill out a form or make an appointment
3. Provide the necessary photo ID
4. Double check the details

Alternative To Naming a Beneficiary on a Bank Account

If you already have a living trust set up, you can put your bank accounts in the trust. When you die and the trustee takes over your account, they can transfer the funds to the beneficiary without any probate proceedings.

To do this, you’ll need to fill out a Certificate of Trust at your bank.

Final Take

If you don’t want your bank accounts to go into probate after you die and have the court decide who gets what, you can typically name a beneficiary.

It takes a few steps to name beneficiaries to bank accounts, but doing so can enable you to rest assured that after you die, your hard-earned assets will get distributed exactly how you intend them to be.

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