Can You Transfer a CD to Another Person?

A Certificate of Deposit (CD) is a popular savings tool offering a fixed interest rate for a predetermined period. Many individuals use CDs for savings, but a common question is their transferability to another person. Directly transferring a CD to another individual, similar to how one might transfer a stock certificate, is generally not possible. This article explains why direct transfers are limited and explores alternative methods for transferring the financial value held within a CD.

The Nature of Certificates of Deposit

A Certificate of Deposit is a contractual agreement between a depositor and a financial institution. You deposit a specific sum for a fixed term, and the institution pays a fixed interest rate. This fixed term and rate offer predictability for both parties.

CDs are considered time deposits because the funds are held for a set duration. Early withdrawals usually incur penalties, which can involve forfeiting a portion of the accrued interest. Unlike negotiable instruments, typical retail CDs are not designed for easy transfer or endorsement to another individual.

Limited Transferability and Ownership Changes

Standard Certificates of Deposit are generally not directly transferable between living individuals. The original agreement is between the depositor and the financial institution and cannot be simply assigned to a new owner while the CD is active. This limitation helps ensure compliance with customer identification requirements.

While direct transfer is restricted, ownership or access to the CD’s value can change through specific designations or legal processes. A Payable on Death (POD) or Transfer on Death (TOD) designation allows the CD’s funds to pass directly to a named beneficiary upon the original owner’s death, bypassing probate. This is a post-mortem arrangement and does not grant the beneficiary any rights to the funds during the original owner’s lifetime. Similarly, a CD can be established with joint owners, such as “Joint Tenancy with Right of Survivorship,” where ownership automatically transfers to the surviving joint owner upon the death of one party. Both serve as estate planning tools.

CD ownership might also change due to court orders, such as those arising from divorce settlements or bankruptcy proceedings. These are involuntary changes driven by legal mandates, distinct from a voluntary transfer by the CD owner.

Alternative Strategies for Value Transfer

Since direct CD transfers are limited, individuals must consider alternative strategies to provide its value to another person. One approach is to allow the CD to mature, or initiate an early withdrawal, and then gift the cash. Early withdrawals typically incur a penalty, often a forfeiture of several months’ interest. For example, a penalty might be three months of interest for a one-year CD.

The original owner can then gift the cash. For 2025, the annual gift tax exclusion allows an individual to give up to $19,000 per recipient without incurring gift tax implications or requiring a gift tax return to be filed. Married couples can combine their exclusions, effectively gifting $38,000 per recipient annually. Amounts exceeding this annual exclusion would reduce the giver’s lifetime gift and estate tax exemption, which is $13.99 million per individual for 2025.

Another practical method is to use funds from a matured or early-withdrawn CD to open a new CD directly in the recipient’s name. This ensures the funds continue earning interest in a CD vehicle. For gifting to minors, a Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA) custodial account can be established. An adult manages the CD for the child until they reach the age of majority, providing a structured way to gift the CD’s value while maintaining oversight.