Can You Name a Beneficiary on a Savings Account?

Can You Have a Beneficiary on a Savings Account?

You can add a beneficiary to your savings accounts, including high-yield savings accounts, money market accounts and certificates of deposit (CDs). Designating a beneficiary tells your bank or credit union how you want them to distribute your money when you pass away.

Although financial institutions don't necessarily require you to name a beneficiary (or beneficiaries), doing so goes a long way toward ensuring that your money ends up with your preferred heir(s)—and not tied up in probate. Adding a beneficiary to your account is typically free and it doesn't give your beneficiaries any rights to access your money or account information while you're alive.

Do You Need a Beneficiary if You Have a Joint Account?

A joint account typically passes to the surviving account holder(s) when one account holder dies. You may still want to name a beneficiary, though, to determine who receives the money in the account when all parties on the account are deceased.

Reasons to Add a Savings Account Beneficiary

The main reason to add a beneficiary to your savings account is to avoid probate. Probate is a legal process for transferring property after a person passes away. The probate process can take a year or more, tying up assets your heirs may need to cover expenses.

Naming a beneficiary for your account doesn't take the place of having a will or living trust, particularly if you have real estate or personal property you would like to pass down to specific people or charities. At the same time, having a will doesn't necessarily take the place of naming a beneficiary for each of your financial accounts. In many cases, financial institutions give priority to following your beneficiary instructions rather than a will, as these instructions are considered part of your banking contract.

How to Name a Beneficiary on a Savings Account

The process may vary slightly from one financial institution to another. At some banks, an account that names a beneficiary is called a payable-on-death account; at other financial institutions, it may be known as a tentative or informal trust. You may be able to access and complete the forms you'll need from your bank's website or app. If not, a quick visit to a branch or call to customer service should put you on the right track.

• Complete the forms. You'll need the full name of each beneficiary. You may also need their mailing address, phone number, date of birth and/or Social Security number. This is so the bank can contact them and, eventually, verify their identity in the event of your death. In addition to naming individuals, you may be able to designate a favorite charity, nonprofit or business as a beneficiary.
• Notify your beneficiaries. While you aren't required to let your beneficiaries know that they've been named, you may want to notify them so they'll know to request the money when you die. Beneficiaries need to present a death certificate and proof of identity (and generally nothing more) to collect the money.
• Update beneficiary information. You'll need to let your bank know if you decide to change or add beneficiaries on your account, or if their information (such as address or name) changes. If you don't know whether your current accounts have beneficiaries, check with your financial institution to find out.

The Bottom Line

Adding a beneficiary to your savings accounts is easy, and it can be a real help to your loved ones if funds are needed immediately to cover bills and final expenses. While you're at it, you can add beneficiaries to many other types of bank and financial accounts, including checking, money market, investment and retirement accounts. Even when a larger will, trust and estate plan are in place, payable-on-death accounts can streamline at least one part of the inheritance process and make settling your estate a bit easier.