A checking account's beneficiary is the person you want to receive account funds after you die. Most people use checking accounts to deposit paychecks and other benefits and accomplish everyday transactions such as paying bills, insurance, and rent or mortgage. While naming a beneficiary for a checking account isn't common, it can help you pass down assets after your death. Here's how you can add a beneficiary to a checking account.
Key Takeaways
- Checking accounts don’t require account holders to name a beneficiary.
- Naming a beneficiary can help you avoid delays and expense with passing on your assets.
- Naming a beneficiary is fairly simple but may require paperwork and information, such as the beneficiary's Social Security number.
- Many banks offer payable-on-death (POD) accounts, instructing the bank to pass your account funds to one or several beneficiaries.
Do Bank Accounts Need Beneficiaries?
Unlike some other accounts, checking accounts aren't required to have named beneficiaries. But you may want to consider designating beneficiaries for checking accounts to spare your survivors from dealing with the delays and expense of probate.
Probate is the legal process of settling a deceased person's property. Under normal circ*mstances, when you die, the money in your bank accounts becomes part of your estate. But an account with a beneficiary typically passes directly to the named person, as determined by state law.So, naming a beneficiary allows far faster access to funds.
To claim the account's money, the beneficiary has to show up at the bank with proof of identity and a certified copy of the account holder’s death certificate. Sometimes, the beneficiary fills out a form to receive the funds by transfer, check, or wire. But the beneficiary has no right to access funds before your death.
The owner of the account is insured up to $250,000 National Credit Union Association (NCUA) or Federal Deposit Insurance Corp. (FDIC) for each unique beneficiary.
How to Name a Beneficiary for a Checking Account
In general, you can choose a beneficiary with an online or paper form you mail in. You can elect one or multiple beneficiaries depending on your bank or credit union. If you name multiple beneficiaries, the amounts will generally be shared equally among those you name. But you might also be able to indicate the percentage of distribution you desire. For example, you may choose to allocate 70% of your account's assets to one adult child and 30% for another adult child.
In some cases, you'll name primary and contingent beneficiaries. Contingent beneficiaries only receive funds if the primary beneficiaries have also died.
When filling out the form, you may also need to provide your beneficiary's:
- Full name
- Social Security number
- Phone number
- Date of birth
- Street address
- Relationship to you
You can add, remove, or change a beneficiary at any time using the same process.
Make sure you tell your beneficiaries about the account or leave account information easily accessible. Some financial institutions may require account closure within a specific timeframe.
POD Accounts for Beneficiaries
Some banks and credit unions allow checking accounts to be converted into a payable-on-death (POD) account, passing on all the client’s assets to the named beneficiary. POD accounts are governed by federal and state law.
To convert a checking account to a POD account, you choose a beneficiary and notify the bank of your wishes. The bank, in turn, gives you, as the account owner, a beneficiary designation form called a "Totten Trust" to fill out. The completed form allows the bank to convert the account to a POD, allowing the account’s funds to pass directly to the beneficiary or beneficiaries after your death.
Generally, you can choose any living person or group of people as POD beneficiaries. You may also be able to choose entities and organizations such as charities, non-profits, and trusts as beneficiaries. Check with your bank or credit union for details.
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What Happens If You’re Married?
In community property states, state law can complicate POD account fund distributions for married POD account holders.
Depending on how the POD is structured and your state, the named beneficiary may or may not receive the funds. If you have a joint account (described below) with your spouse, all beneficiary additions and changes must usually be approved by other joint account holders.
Other Options
Alternatively, you could add a joint account holder on your checking account. This may be a spouse or child. Visit your bank branch to request another name be added to the account. Ensure that person is with you because they must sign all the paperwork.
A joint bank account can remove the need to name a beneficiary if the joint account holder is your desired beneficiary. However, you must ensure you set up the account to follow all state laws regarding the "right of survivorship" to pass funds to the surviving account owner.
Adding a joint account holder does give the other person the right to access funds before your death and spend funds in any way. Creditors can also try to use joint account funds to repay debts either of you rack up.
You don't need a will to name a beneficiary or joint account holder. But remember that you should also have a will to distribute all your assets and possessions. Having a will takes complete care of your affairs, whether or not your accounts have beneficiaries.
Is Naming a Beneficiary for Your Bank Account Always a Good Idea?
You might want legal assistance if your beneficiary needs help managing money. For example, if you want to leave money to a child who is still a minor, incapacitated, or disabled and receiving government aid. If your funds could lead to unexpected impacts, speak with a lawyer.
What Happens if There is No Beneficiary on a Bank Account?
If you don’t name a beneficiary on a bank account, the account’s funds will become part of your estate. Your estate’s property will be decided in probate court. The probate court distributes funds only after determining a will’s validity and intent, your heirs and beneficiaries, your property’s worth, and settling debts.
Can a Beneficiary Withdraw Money From a Bank Account?
A beneficiary can’t withdraw money from a bank account before the account holder’s death. But the beneficiary can withdraw some or all money from the bank account after your death, in accordance with your wishes. For example, if you left 25% of your account to a beneficiary, the beneficiary will receive 25%.
The Bottom Line
When you first signed up for your checking account, you may or may not have been asked to name a beneficiary. If not, consider adding beneficiaries now to ease any legal process for survivors after your death. Keeping your accounts out of probate means your beneficiaries will receive funds faster—which could help pay for your funeral, burial, and other final expenses or everyday bills.
Once you've added beneficiaries to your checking account, keep beneficiary information current. Review your bank accounts when your family has a significant life change, such as a new birth or adoption, marriage, divorce, or death.
