Can You Put a Beneficiary on Your Bank Account?

It is possible to designate a beneficiary on your bank accounts, a common practice in financial planning. This arrangement provides a mechanism for funds to be directly transferred to a chosen individual or entity upon your passing. Establishing a beneficiary designation is a straightforward process offered by most financial institutions for various account types, including checking and savings accounts. This step helps ensure your assets are distributed according to your wishes and simplifies access for beneficiaries.

Types of Beneficiary Designations

Several options exist for designating beneficiaries on bank accounts. A prevalent option is the Payable On Death (POD) account, sometimes called Transfer On Death (TOD) for investment accounts. This ensures funds pass directly to the named beneficiary upon the account holder’s death without undergoing the probate process. This direct transfer makes POD accounts a popular choice. The account holder maintains full control over the funds during their lifetime, and the beneficiary has no access until the account holder’s death.

Another similar designation is an In Trust For (ITF) account, often known as a Totten Trust. This account functions similarly to a POD account, established “in trust for” a named beneficiary, bypassing probate upon the account holder’s death. Despite its name, it operates as a bank account with a beneficiary designation, not a formal trust. Account holders retain complete control over these funds during their lifetime, including the ability to add or withdraw money and change beneficiaries.

Joint accounts with a “right of survivorship” also facilitate direct fund transfer, differing from direct beneficiary designations. In such accounts, the surviving joint owner automatically inherits the funds, bypassing probate entirely. A key distinction is that a joint owner has full access to funds during the account holder’s lifetime, unlike a POD or ITF beneficiary. While joint accounts offer probate avoidance, they also entail a shared ownership dynamic from the outset.

To establish these designations, financial institutions require specific identifying information for the designated individual. This usually includes the beneficiary’s full legal name, date of birth, Social Security Number (SSN) or Taxpayer Identification Number (TIN), and current address. This information is necessary for the bank to identify the beneficiary and comply with federal regulations. Providing complete and accurate information ensures a smooth transfer process.

Designating a Beneficiary

Adding a beneficiary to your bank account involves contacting your financial institution. This can be done by visiting a local branch, calling customer service, or accessing their online banking portal. The specific method may vary depending on your bank and the type of account you hold. Many banks offer dedicated forms for this purpose, such as a “Payable On Death Beneficiary Designation Form.”

These forms capture the necessary details for your designation. When completing the form, accurately fill in all requested information for your chosen beneficiary. Accuracy and completeness help avoid complications in the transfer process. You may designate multiple beneficiaries and specify how assets should be divided among them.

Submit the completed form to your bank. Submission methods include returning the form in person, mailing it, or uploading it through an online portal. After submission, expect confirmation from your bank, such as an updated account statement or confirmation notice, indicating successful recording. Keep a copy of the completed form and any confirmation for your records.

Transferring Funds Upon Death

When an account holder with a beneficiary designation passes away, the process for transferring funds to the named beneficiary is streamlined. The beneficiary initiates this process by notifying the bank of the account holder’s death. This notification requires a certified copy of the account holder’s death certificate.

The bank will then require the beneficiary to provide documentation to claim the funds. This typically includes their own valid government-issued identification to verify their identity. The bank may also require the beneficiary to complete a claim form. Once the bank verifies the death and the beneficiary’s identity and claim, the funds are usually transferred directly to the beneficiary, often into a new account opened in their name, via check, or through a wire transfer.

A significant advantage of these beneficiary designations is that the funds typically bypass the probate process. This means the transfer of assets can occur more quickly and directly to the beneficiary, avoiding the delays and complexities associated with court-supervised probate proceedings. This direct transfer helps ensure that beneficiaries can access the funds in a timely manner.

While the transfer of funds through a beneficiary designation avoids probate, it is important to consider potential tax implications. The inheritance of bank account funds typically does not incur federal income tax for the beneficiary. However, any interest earned on the inherited funds after they are transferred to the beneficiary would be subject to income tax.

Federal estate taxes generally apply only to very large estates, with a high exemption threshold set at $13.99 million per individual in 2025. Some states may impose their own estate or inheritance taxes, which can vary based on the state’s laws and the relationship between the deceased and the beneficiary. For specific guidance on tax liabilities, consulting a qualified tax professional is advisable.