Bank Account Beneficiaries
One of the biggest mistakes people make before they die is to fail to add a proper beneficiary designation on their bank accounts. This most often results in an unnecessary probate.
I am often asked what the single biggest mistake people make when they die is. It's simple - they leave a bank account with no designated beneficiary.
You can have a wonderful estate plan with a well-drafted will, a trust, or even no estate plan. But if you fail to designate the proper beneficiary on your checking or savings account, you are forcing your family to go through the probate process to access that money. And that means it will cost them time and money to get your money.
Designating a beneficiary on your bank accounts is a crucial step in estate planning that is often overlooked. A beneficiary is a person or entity you choose to receive the funds in your account after you pass away. It is essential to have a beneficiary designated on all your bank accounts to ensure that your assets are distributed according to your wishes.
Understand that some financial institutions call beneficiary designation TODs or PODs — which stand for Transfer on Death or Payable on Death. It is the same thing.
Here are a few reasons why it is essential to have a beneficiary designated on your bank accounts:
Avoids Probate: Probate is a legal process that involves the distribution of a deceased person's assets. Designating a beneficiary on your bank accounts means that the funds in those accounts will bypass the probate process and be transferred directly to the designated beneficiary. This can save time and money for your loved ones and ensure that your assets are distributed more efficiently.
Quick and Easy Transfer of Funds: When a beneficiary is designated, the transfer of funds from your bank account to the beneficiary's account can be done quickly and easily. This can be particularly important if the funds are needed for urgent expenses such as funeral costs.
Customizable: Designating a beneficiary allows you to choose who you want to receive your assets after you pass away. This will enable you to tailor your estate plan to meet your specific needs and ensure that your assets are distributed according to your wishes.
Avoid Disputes: Designating a beneficiary can help avoid disputes among your loved ones over who should receive your assets. Having a clear and specific plan in place can ensure that your assets are distributed according to your wishes and reduce the likelihood of family disputes.
Designating a beneficiary for your bank accounts may seem daunting. Still, it's vital to protect your assets and ensure they get into the right hands quickly and efficiently during life's difficult times. So do yourself a favor right now - stop into your bank or credit union tomorrow, and ask them who is the current beneficiary of each account you have there. If you haven't named one - then do it right away.
Conclusion: Now, beneficiary designations are far from perfect. People sometimes die out of the order we expect. Your relationship with the person you first pick to be the beneficiary may charge. If you name more than one person, they may not get along when it is time to distribute the funds. But they at least avoid probate on that account - which is a huge first step in getting things in order for your family.
