Why you should name a beneficiary for all your bank accounts

If you care about , you’ll want to think about who you should designate as the beneficiary of your bank account.

It’s important to have someone who can quickly access the money in your bank account after you leave. If you died unexpectedly and didn’t designate a beneficiary, your money could be stuck in a probate court for quite a long time.

Depending on your situation, however, it may not be obvious who you should choose as your beneficiary. If you’re struggling with who your beneficiary should be, or wondering if you really need beneficiaries, there are a few things you’ll want to keep in mind.

The benefits of having bank account beneficiaries

Designating bank account beneficiaries has quite a few advantages and not significant disadvantages. Here are some of the main advantages.

You have a say in what happens to your money

This is at the heart of why beneficiaries of bank accounts matter. If you have family members who would benefit from your money and you want them to have that income immediately after your death, you’ll want to designate one or more of those family members as a beneficiary.

If you want your children to have your money and they are under 18, it is a good idea to set up a trust where the funds are held and managed by a trustee until the minor reaches a certain age.

Even if you don’t have loved ones you’d like to receive funds from, you may still want a bank account beneficiary. For example, you could give the honor to a favorite nonprofit. In this case, you would give the nonprofit—just like a family member or friend—as the POD designation ().

You can save your heirs time and money

Without designated beneficiaries, it can take some time for a probate judge to rule on who should get what. Even if the probate process goes smoothly and a family member gets the money into your bank accounts quickly, there will likely be costs involved. Once your spouse, children, uncle, or whoever you’re hoping will get the money has access to the funds, it may take several hundred dollars (at least) for court fees.

You can avoid family fights

OK, you can start a family battle when listing your bank account beneficiaries if, for example, you favor one adult child as beneficiary over another. Or if you have an ex-spouse as the beneficiary of your bank account instead of your current spouse. (In other words, you may want to update your bank account beneficiaries occasionally.)

However, similar to creating a will, designating beneficiaries lets you know what you want to happen to your money if you die. And hopefully, having bank account beneficiaries in place will reduce any potential family friction after you’re gone.

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How to choose a bank account beneficiary

Choosing beneficiaries for your bank account is an important decision that can affect how your assets are distributed after your death.

When deciding who to nominate, consider the current financial situation of potential beneficiaries. Do they need money for specific purposes, such as education, medical expenses or housing?

Many people choose their spouse as the primary beneficiary, especially if they share finances and financial responsibilities. If you have children, you may want to designate them as beneficiaries as well. But it need not be limited to the immediate members of the household; anyone you financially support, such as an elderly parent or grandchild, could be a good candidate to become a beneficiary.

How to designate a beneficiary

Designating a bank account beneficiary is simple. You’ll do this when you set up your bank account, either by listing the bank account beneficiary on a form or adding them through your online banking platform or .

If you’re having trouble finding where to add your beneficiaries, you can always call customer service or visit your bank branch. And you can always contact the bank after opening the account to add or change a beneficiary.

You’ll need the beneficiary’s full legal name and possibly additional information such as their mailing address, email, phone number, and social security number.

Some states may handle things differently, but you can usually cut as many beneficiaries as you want. You can also specify the percentage of funds that each beneficiary should receive, but you must make sure that the grand total reaches 100%. For example, let’s say you wanted to drop your husband and sister as beneficiaries. You can choose to split their funds 50/50 or select different ratios such as 60/40.

Bank account beneficiary rules

Bank account beneficiary rules are usually a combination of what your financial institution allows and state laws. Here are some guidelines to keep in mind:

• There is no rule that says you have to have a bank account beneficiary, although it is highly recommended.

• Bank forms do not always request a payee; you may need to contact your bank to add a beneficiary.

• In order for the beneficiary to get their money, they will probably need to provide the account holder’s death certificate first.

• If the account is overdrawn at the time of your death, there will be no funds to give to beneficiaries. On the bright side, your beneficiary won’t be responsible for keeping the account up-to-date.

Bank account beneficiary vs. will

It may seem like naming a beneficiary could replace the need for a will, but it really isn’t a substitute for a good succession plan. For example, a beneficiary of a bank account does not determine who should get a house or a car or how your other assets should be distributed.

Life is often complicated, and if you own a lot of assets beyond , you probably also need a will.

If you’re making a will, you’ll also want to make sure that if you list a bank account beneficiary in your will, it should be the same as the name you gave the bank. If you want to change that person at any time, that’s fine, but make the change with your bank as well. If the names are different, the beneficiary of the bank account will generally be the beneficiary of the funds and not the one you named in the will.