Posted On: August 15, 2024 by Prevail Bank in: Banking
You don’t have to identify beneficiaries for your deposit accounts (checking accounts, savings accounts, certificate of deposits (CDs)…), but there are many reasons why you would want to. 1) If you do identify a beneficiary for your financial assets, your loved ones will get that money, stocks and bonds, insurance policy payout, etc. a whole lot quicker than if you didn’t. Because when you don’t identify a beneficiary, your deposit accounts, upon your death, will go through Probate Court, which in WI could take anywhere from 6-18 months – or longer! And if attorneys are involved, then it'll cost them money as well.
Another benefit of identifying a beneficiary is the privacy and control you’ll have. Anything that goes through Probate Court becomes public record. The control comes into play when you name a person outside the family, or a charity, or someone lower on the family totem pole than what your state’s intestacy law would otherwise dictate. By naming a beneficiary, it almost guarantees they will get the asset you identified for them. If you don’t, the Court decides.
Other things to know:
You retain control and ownership of these assets until your death. Nothing changes until then.
If you have a Will, the name(s) listed as beneficiaries on an account will, in most instances, overrule those listed in a Will or Trust.
If you name just one beneficiary with the expectation that he or she will share it with other family members, you need to know, that might not happen. Because once a deposit account is paid out or transferred, it becomes theirs to do with as they please.
And, you can change your beneficiaries at any time and as often as you like. In fact, you’ll want to review them on a regular basis anyway, especially after major life events like a marriage, divorce, or the birth of children.
What’s the difference between a POD and TOD?
Usually, when you name a beneficiary for an asset, you’ll be completing either Payable on Death (POD) or Transfer on Death (TOD) paperwork. They are essentially the same thing. In the simplest of terms, if the asset is liquid (IE: bank accounts), then it is usually a POD. TODs are used primarily for securities, stocks, and bonds. These assets (stocks and bonds) are not cashed out; the ownership is just transferred to another person(s).
Quite frankly, you probably don’t want to establish a POD for everything.
How is the executor of your estate going to pay off your outstanding debts; IE: car payments, mortgage, credit card bills, hospital bills, legal fees associated with probate, funeral expenses… if all the cash is gifted away?
Or, if you name a beneficiary who is collecting government benefits, like Medicaid, a large gift of cash could cause them to lose their benefits.
In conclusion:
Estate planning (naming beneficiaries) can be a little tricky (it varies by state). It is recommended that you work with an estate attorney and/or financial advisor. They can help you determine which funds should have beneficiaries, how to make sure there is cash (or liquidity) for any outstanding debts, and how to streamline the inheritance process so your assets are managed the way you want them to be when you die.
At Prevail Bank we look out for our customers. We’ll typically ask if you’d like to establish a beneficiary for your accounts when you open them. Not everybody does that.
As a sidenote, Prevail Bank has some very competitive CD rates available, in addition to some great personal checking account options with free debit cards, free bill pay, no monthly service fees, no statement fees, no minimum balance requirements… you even get a free gift for opening an account. Click the links to check them out.
