Almost everyone has a bank account, that much is pretty straight forward. What’s sometimes less commonly understood though, is how to go about handling a bank account beneficiary vs Will beneficiaries. Don’t worry - the differences between the two types of beneficiaries really aren’t too hard to grasp, once you understand the basics of both and well as how you should handle them in your Estate Plan.
So, what, exactly, are the differences between bank account beneficiaries and Will beneficiaries? What do you need to know about the two? We’re covering all of it here. We’ll discuss everything you should know about Will vs bank account beneficiaries. Your Estate Plan should be set up the best way possible, with no holes or missing aspects that will make things more difficult for your loved ones after you pass away. Read on, as we cover:
What Does It Mean to Be a Beneficiary on a Will?
Naming a beneficiary in your Will means you’re telling everyone who you want to have what when it comes to your estate. You can name one - or one hundred - beneficiaries in your Will. There’s no rule or suggested way to go about naming beneficiaries. For more information about what a beneficiary is, check out our in-depth article, “What is a Beneficiary - A Complete Guide.”
“A beneficiary is anyone you name in your Estate Plan who will ultimately benefit from your estate. The benefits could be in the form of money or anything else you pass down. Beneficiaries are an important part of your plan, as they give purpose and guidance for what you’re leaving behind.”
What Does it Mean to Be a Beneficiary on a Bank Account?
While traditionally, beneficiaries are associated with life insurance policies, IRAs, annuities, etc., you actually can add a beneficiary to your bank account. Doing so makes the process of transferring money after you pass away easy and obvious for the person you want the money to go to. While banks do not require accounts to have named beneficiaries, it’s very common for them to have what’s known as a Payable on Death (POD) account. And the good news is, even if you have an existing bank account, it's easy to convert it into a POD account at any time.
There are several benefits to having a POD account - the primary one being just a simplified process that gives someone access to the money in your account after your death. If you have not set up a POD account, and you haven’t named anyone in your Will or Trust, state Intestacy laws would determine who should get the money.
Can You Put a Beneficiary on a Bank Account?
Yes, you can put a beneficiary on a bank account. You have a couple different options to accomplish the goal, and all of them are fairly easy.
If you’re opening a brand new account, you could immediately open a POD account. This would mean the account automatically transfers after your death.
If the account is already open, it’s usually easy to go to the bank in person and add one or more beneficiaries to the existing account. Make sure you have your photo ID and the beneficiary’s information.
Finally, you should not name a minor as a beneficiary for any bank account. If you want money to go to someone who’s not a legal adult, you can name a guardian as the beneficiary. He or she would oversee the money and manage it for the minor in question.
***Be sure to also set up legal guardianship***
Does a Beneficiary on a Bank Account Override a Will?
Generally speaking, if you designate a beneficiary on a bank account, that overrides a Will. This is in large part due to the fact that beneficiary designations have the ability to (and benefit of) completely avoiding the probate process.
Beneficiary designations most often supersede all outside Estate Plans and agreements (including divorce and prenuptial agreements). And don’t worry, as long as you’re living, your beneficiary doesn’t have access to your account unless you’ve set them up as a cosigner.
Which Should I Set Up - A Bank Account Beneficiary or a Will Beneficiary?
Nothing is more important than having a sound, comprehensive, thorough Estate Plan that protects you and your loved ones as much as possible. That said, in addition to having a Will and Trust set up, you really should also have your bank accounts set up to include beneficiaries. This way, you can take as much of the headache as possible out of the process your loved ones will have to go through after you pass away.
It may seem overwhelming, but the truth is setting up your Estate Plan is easy when you use a service like Trust & Will. Because all the guesswork is removed from the process, you can be finished in a matter of minutes, confident in the fact that you’ve done everything you can to take some of the burden off those you leave behind. Including designated beneficiaries for your bank account as part of your Estate Planning efforts is another way you can protect those loved ones.
We understand that Estate Planning can seem daunting. That’s why we set out to make the process accessible and affordable for everyone. If you haven’t done it yet, get to the bank today to set up beneficiaries on your accounts, and reach out to Trust & Will to create your Will and Trust as soon as possible. There truly is no better time than the present to ensure your loved ones and your legacy are protected.