Senior Living News

Estate planning is important for seniors. Making plans for how your assets will be divided up after you pass away can simplify things for your loved ones and allow them to receive funds more quickly. Adding a beneficiary to your checking or savings account is one way to make settling your estate easier.

What Is a Beneficiary?

A beneficiary is someone who'll receive something after a person dies. You often hear the term in relation to insurance policies, where the beneficiary is the one who gets the death benefit.

The term has the same meaning for checking and savings accounts. Once you pass away, the bank gives the money directly to the beneficiary.

How Is a Beneficiary Account Different From a Joint Account?

With a joint account, the other person you list shares ownership of the account. If your joint account title lists you "or" someone else, each of you can withdraw money, get account information and make changes to or close the account. A joint account labeled you "and" someone else requires both of your signatures to make withdrawals or changes.

Beneficiaries don't own your account. They can't withdraw money while you're alive or even get information about the account balance. Only after you die will the beneficiary receive access to the money.

What Are the Benefits and Drawbacks of a Beneficiary on a Bank Account?

Some key benefits of having a beneficiary on a bank account include:

• Simple access: In most cases, the beneficiary only needs to show a death certificate to access the funds in the account. There's no need to wait for claims processing, and the money doesn't need to go through probate.
• Cost-effective: You don't need to pay a lawyer or an accountant to file paperwork to add a beneficiary to the account. Normally, banks don't charge fees for the service.
• No limit: Most banks don't have limits on how much you can place in a checking or savings account. However, the Federal Deposit Insurance Corporation (FDIC) only insures up to $250,000 per depositor, per bank. As a result, you may want to cap your total deposits at this amount to ensure your money is safe if the bank ever faces financial trouble.
• Privacy and retained control: Your beneficiary won't be able to access money or receive information about the account until you pass away. This protects your privacy and eliminates any worries about funds being used without your permission.

Despite their benefits, beneficiary savings and checking accounts do have some drawbacks you need to be aware of. They include:

• Lack of access: If your primary goal in adding someone to your checking or savings account is to get help paying bills or balancing your checkbook, a joint account is a better option.
• Less growth: Compared to other types of investments, beneficiary savings accounts typically earn only a small amount of interest. Many checking accounts don't pay interest at all. Those that do usually pay even less than savings accounts.
• Potential for updates: Banks usually don't allow you to name alternate beneficiaries. If your beneficiary precedes you in death, you'll need to select a new beneficiary.

How to Choose a Beneficiary

Most financial institutions will allow you to name more than one person as a beneficiary. Each beneficiary will receive an equal amount of the balance. For example, two beneficiaries would each get 50%, while four beneficiaries would get 25%.

Your beneficiary doesn't have to be a person. Most banks will allow you to name a for-profit business, trust or nonprofit organization as a beneficiary.

When selecting a beneficiary or beneficiaries, consider:

• Age and health: Because you can't name an alternate beneficiary, choosing people younger than you and in generally good health can reduce the need for updates.
• Any debts you owe: If you have debts to settle, naming the executor of your estate as the beneficiary can simplify payments.
• Financial need: You may wish to consider who in your life would benefit most from the money.

How to Add a Beneficiary to a Checking or Savings Account

In most cases, you'll need to visit your financial institution's branch office in person to add a beneficiary. Call ahead and set up an appointment to avoid a long wait. Autumn View Gardens senior living community offers scheduled transportation as a lifestyle amenity for residents. Take advantage of the service to get to your bank or credit union in Creve Coeur, MO.

To verify your identity, your financial institution may require you to present your driver's license or a state-issued ID card. If you don't have one, ask what forms of identification are acceptable when you schedule the appointment.

Your beneficiary doesn't have to be present for the appointment, but you'll usually need to have key information about them, such as:

• Full name
• Date of birth
• Country of citizenship
• Social Security number
• Current address

If you wish to name a nonprofit organization or a business as your beneficiary, you'll need:

• Complete name of the entity
• Tax identification number
• Complete business address

Once you've added a beneficiary to the account, be sure to store the documentation in a safe place along with other documents like your will or life insurance policies.