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.

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

  • Yolanda

    What if a I am a beneficiary together with my father’s wifes daughter, we are the oldest from both sides and my father dies, can the CD be taken out without me being there to show my id and death certificate for my father? Please answer as soon as possible. Thank you.

  • ee

    Yolanda,
    The easiest way to find out is to call the bank that is holding your CD. You should do this ASAP to see if it can be withdrawn without your permission. Are you holding the death certificate?

  • jim

    does bank have to be notified upon death or con the beneficaries wait until the cd matures , say 3 years from now ?r

  • Lita

    Can a foreign born person, not residing in the USA be the beneficiary of a USA Bank CD

  • mike

    PLEASE – be aware that if you leave your CD to someone using POD, that person will own the CD legally and they DO NOT have to share it with anyone. For instance – if you wanted your children to share all of your assets evenly after you die, but there is only one name listed as POD on your CD, your other children will be out of luck. Don’t assume your child will do the right thing and share with siblings. Odds are, that won’t happen and it can tear your family apart. Voice of experience here. My parents’ wills said my brother and I should inherit evenly; my father left all his assets POD to my brother for ‘convenience’ not realizing the will was voided. Brother walks away with half a million dollars.