04 Dec Why You Need to Designate a Beneficiary for Your Bank Accounts

Did you know that you can designate a beneficiary for most bank accounts? Naming a beneficiary is the easiest way to allow your loved ones to access your accounts and avoid having to deal with the complications of probate court. Here’s why you need a beneficiary for your bank account, and how to set one up.

What Happens to Bank Accounts with No Beneficiary?

Without a beneficiary, your bank account will have to go through probate before your loved ones can gain access to the funds. This expensive court process could take months or potentially even years. But when you designate a beneficiary, that person will automatically become the new owner of the account when you die. This transfer process is much faster and simpler than waiting for probate, and it allows your loved ones to access funds immediately.

If you don’t name a beneficiary and you don’t have a will, the court will distribute your assets according to the laws of intestate succession. This means that you have no say over who inherits your assets. If you want your funds to go to an unmarried partner or anyone else who is not closely related to you, it’s very important to designate a beneficiary. 

Do Joint Bank Accounts Have to Go Through Probate?

In most cases, yes. If you have a joint account, the other account holder will only have access to 50% of the funds. Your “half” of the account will still have to go through probate, unless the other person on the account is your legally married spouse. So if you have a joint account with an unmarried partner or one of your children, you’ll need to name them as beneficiary, otherwise they won’t have full access to your shared finances.

How to Set a Beneficiary for Your Bank Accounts

The process for designating a beneficiary can vary, depending on the financial institution, but it should be a fairly simple process. Typically, you’ll be asked to complete a “Payable on Death” designation form, which names the individual who will inherit the funds after your die. Here are the basic steps:

Contact your bank.

Many banks allow you to designate a beneficiary on savings, checking, and other accounts, but it’s best to confirm this with your financial institution.

Fill out a POD form.

The bank will provide a form where you can list the beneficiary’s name, contact information, and relationship to you.

Update as needed.

Life changes like marriage, divorce, or the death of a loved one may prompt you to revise your beneficiary designations. 

When to Name a Trust as Your Beneficiary

In some cases, naming a trust as beneficiary may be a better option. For example, if you want to provide for minor children or have greater control over how your financial assets are handled, setting up a trust is a good idea. With a living trust, you can specify when and how the funds will be disbursed, and you can appoint a trustee who will manage them according to your wishes. 

Ask an Estate Planning Expert for Help

Designating a beneficiary for your bank accounts is an easy way to secure your family’s financial future. By taking this simple step, your loved ones will have timely access to your accounts, and they won’t have to wait through the lengthy probate process. If you’re ready to take this step, or if you need further estate planning guidance, the team at Phelps LaClair is here to help. We’ll guide you in making informed decisions that protect the people you care about most. 

Contact us today to schedule a free consultation at one of our Phoenix area locations.

Photo by Jonathan Cooper on Unsplash used with permission under the creative Commons License for commercial use 12/3/24.