How Important Is It to Set Up Beneficiaries for All Your Accounts?

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Last updated on October 27, 2020 Comments: 23

Wherever you are on your path towards financial independence, it’s important to think about what would happen to your financial accounts if you unexpectedly passed away. It seems like a morbid thought, but planning for the well-being of your family is essential.

Even if you don’t yet have a spouse or children, thinking ahead financially is still important. It could smooth the way for any friends or extended family members who will deal with your affairs, should you die.

Obviously, this process involves creating the proper wills and trusts. But one more simple step could help your heirs avoid some problems: designating beneficiaries.

Related: Trust and Will Review – Affordable Online Estate Planning

Even if all of your financial assets are properly distributed in your will, your heirs may get tied up in probate dealing with specific financial accounts unless you designate beneficiaries. The good thing is that you can easily add beneficiaries to most accounts, bypassing the harrowing (and potentially expensive!) probate process. The beneficiaries designated on your account will only need some basic paperwork to receive money left in that account following your death.

Not sure how to add these designees to your accounts, or even which accounts need beneficiaries in the first place? We’re here to help!

Adding Beneficiaries to a Checking or Savings Account

You can add a beneficiary or a payable-on-death (POD) to most savings and checking accounts. Sometimes your bank will ask for this information when you’re opening a new account, but they don’t always. And sometimes you can’t add or change beneficiaries online.

If your bank has a brick-and-mortar branch, you may need to visit the personal banker with the beneficiary or with that person’s information, including address and Social Security number to add them to your account or change beneficiaries.

Dealing with an online-only bank or one that doesn’t have a location in your area? Call the bank directly to ask how you can designate beneficiaries for each of your accounts.

Unfortunately, some banks (including ING Direct) doesn’t allow account holders to designate beneficiaries. If this is an issue for you, consider moving your money to another bank that does allow for a payable-on-death designation.

You can also address this bank specifically in your will or trust. Again, even a will or trust may not remove all the headaches associated with accessing a bank account’s balance after your death. But if you like everything else about your bank account, aside from the fact that it doesn’t allow for a payable-on-death beneficiary, you may not want to switch banks. In this case, just ensure that the bank account is covered in your will.

Read More: The Best Online Savings Accounts With High-Interest Rates

Beneficiaries on Investment Accounts

Brokerages and banks will usually ask for a beneficiary when you open an investment account of any kind. Even if you don’t plan to save massive amounts of money in any given account, be sure you designate a beneficiary right away. You never know how that account balance could grow between now and when you might pass away.

Plus, a small account balance gives you even more incentive to name a beneficiary. In the case of accounts with a relatively small balance, probate fees could eat up the entire account balance if you aren’t careful.

Insurance Policies

Policies like life insurance will obviously ask for a beneficiary right away since their point is to benefit your heirs should something happen to you. Still, you’ll want to be sure that these policies are kept up-to-date with your recent beneficiaries.

What About Joint Accounts?

You might think about skirting around the need for a beneficiary by naming a joint account owner, instead. In some cases, this can be appropriate. For instance, if you and your spouse combine finances, it’s appropriate to have most of your basic checking and savings accounts in both spouse’s names, even if you actively manage most of the money.

Naming your spouse as a co-owner on your accounts usually makes sense, but naming another person as co-owner may not. For instance, adding an adult child to your account gives that child the power to withdraw from your account at any time, even before your death. Also, the co-owner will inherit your account upon your death, even if you’d prefer to name multiple beneficiaries.

Other issues to consider include credit issues on the part of the account co-owner. If your joint account owner gets into financial difficulty, creditors could come after the balance of your account, even if the co-owner has never contributed to that account.

Joint accounts could be a viable solution for skirting around probate issues in some cases, but there are plenty of potential dangers to consider, as well.

Read More: Choose the Best Joint Bank Account

Compiling Your Financial Information

Of course, you can designate a beneficiary on every one of your fifteen different bank accounts. But that doesn’t do a whole lot of good if your beneficiary doesn’t even know about the accounts after your death. This is why it’s so important to keep a file — whether electronic or physical — of all of your personal financial information.

Maintaining a money binder is an excellent way to keep all of your financial information together, including account log-in information. Just having a list of where you maintain all of your accounts and who the beneficiaries for those accounts are gives your heirs a place to begin.

Changing the Beneficiaries

One thing to keep in mind is that you’ll need to keep your beneficiaries up to date. Any major life event, such as a marriage or divorce, or the birth or death of a child, means you need to look over your account beneficiaries to make sure they’re still accurate. Also, be sure that your account beneficiaries are listed in the appropriate order. This is important if you, for instance, want to account to pass first to your spouse but then to your child if your spouse has also passed away.

When you’re changing the beneficiaries on your accounts, be sure to also change those beneficiaries in your will so that they match. Mismatches between your will and your account beneficiaries can create major hangups for your heirs! Whenever you update one, double-check the other to ensure that it’s correct.

More Complicated Situations

As you move towards financial independence, you’ll begin to enter on to more complicated financial situations which might require true estate planning. After all, you don’t want to see all your hard work and careful planning go to waste when your beneficiaries are heavily taxed on what you leave behind!

Legal advice is a good idea, in less complicated cases you can save a fair amount on legal fees using an online estate planning service. While in more complicated cases such as multiple marriages, it would be wiser to contact a “brick and mortar” experienced lawyer.

Keep this in mind as you progress through your financial goals. If you’re well into the millions of dollars of assets, it’s probably time to do more than just designate beneficiaries and set up a basic will. At this point, you’re likely looking at trusts and other inheritance issues.

Still, though, even if you pull in a professional estate planner, you’ll have to take this step to ensure that all of your accounts are set up with beneficiaries that match your estate plan.

Related: Save Your Heirs On Taxes By Being Generous Now

Article comments

C. Blank says:

Be extremely cautious with any accounts held with Wells Fargo Advisors. My mother has an IRA on which I am listed as %100 beneficiary. Each and every monthly paper statement from Wells Fargo listed me as beneficiary. Assets with designated beneficiaries do not require probate. She passed in 2020. When I contacted Wells Fargo Estate Processing Services, they informed me that there was no listed beneficiary for the IRA, and that the Wells Fargo statements are not accurate. I am still trying to sort this out, it appears they will require the probate process to be finished and once I obtain the Letter of Testamentary for the estate I will be able to transfer the assets from my mother’s IRA to a beneficiary IRA. The whole point of a listed beneficiary is to avoid the probate process.

Veter says:

Hi. How do you refer to the assigned account beneficiaries in your will?
Also, what if you have asisgned the account to one person in the will, but it is a different beneficiary assigned in the account?

Larry G Grant says:

Is there a limit on the amount of money you can pass to a beneficiary in a bank account?

Larry G Grant says:

I was told that if you have a bank account with a named beneficiary and the value of the account is more than $150,000, do you have to probate the amount above $150,000?

Linda says:

My mother-in-law had a trust set up and moved all of her assets to the trust except one bank account that she left out and named my husband as beneficiary. We took care of her for the last 6 years and even moved into her neighborhood so she would not have to go to a nursing home. We did not know about this account, but my husband feels like he left that to him. Will that have to be part of the estate? The bank transferred it to our account since he was named as the only beneficiary.

Carrie says:

Capital One Bank does now allow you to designate beneficiaries. And you can do it online.

Martin says:

Unfortunately, many banks will not allow you to set up a p.o.d. without the other person’s social security number. Since my relatives are not going to disclose their social security numbers, they will have to deal with probate when I die. I don’t see any good reason why the bank needs their social security numbers. Names and addresses and relationship to me should be sufficient.

Bert Cabello says:

Probate is not a good process, between probate lawyers fees and IRS taxes, there will be nothing left for your beloved heirs. The larger the estate is, the larger fees and taxes. Build your own living trust through online like To me, it’s reasonable! Good luck!

Tom says:

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Robert says:

You have to be care with 401K’s and a will and beneficiaries. The wife will often trump what is said in either. Unless the wife specifically signs away the 401K she will often receive it. This is particularly awkward when a spouse remarries and he had wanted the children to receive the 401K. The new wife will be automatically entitled to it regardless of what the beneficiary designation states, unless she specifically signed away on this.

Anonymous says:

Dear Sirs/Madams,

Please, please somebody from the Barclays Bank contact me about the death of your Customer .

I, e-mailed already about 2 weeks – but no response . And your New York Branch not responding about this.

Luke Landes says:

You’re going to need to contact the bank. This website is not affiliated with the bank.

Anonymous says:

I am actually doing this right now with a new brokerage account.

Anonymous says:

Here’s an interesting one – make sure to CHANGE your beneficiaries if you write someone out of your will! I have a particular family member who had a falling out with their child. They wrote said child out of their will but never updated the beneficiary info on their 401(k) account. Even though the child didn’t recieve funds out of the general estate, she got the 401(k). (she totally deserved some inheritance by the way, the parent put her through hell); but this was an obvious oversight on the parent’s part.

Anonymous says:

The only thing to remember is that you need to change those PODs/TODs when a life changing event occurs – especially with IRA/401(k)s!

Anonymous says:

This is a great reminder. I have a brokerage account that asked for beneficiaries when it opened, but have not added my son since he has been born. You just never know eh? Thanks for the read!

Anonymous says:

I had never considered doing this for my checking or savings accounts. I’m sure there are rules against it but what is to stop someone from logging into my ING accounts after i pass using the login info i leave behind (document left with my will) to just transfer all the money out. Seems that would be an easier (if legally shadier way) with all this online access.

Anonymous says:

I need to update my information and make sure my husband is the beneficiary. We’re young but you never know.

Anonymous says:

And just a reminder for those beneficiary forms…my name’s spelled D-Z-I-U-B-E-K. A lot of times people put the U before the I.

Anonymous says:

I realize that 5 need to update some of my accounts. My husband is first but my parents are back up and they have both passed away. My Mom last year and I never thought to update anything other than my insurance.

Anonymous says:

Woops that should be I not 5.

Anonymous says:

I try to do this and I am annoyed that ING will not allow it. Having joint accounts can be tricky. If the person named on your account is sued, they can go after what is really your money. Also, it could make the other person ineligible for things they might qualify for…..there are many considerations.
All in all, the POD is easier.

Anonymous says:

Great advice: POD and TOD (Transfer on death) designations will, in many cases avoid probate but they should not be used in lieu of a will, estate plan, and at least one joint account if you don’t have a spouse. When a distant relative passed intestate it took me 19 months to recover what I paid in “final expenses” because everything was in her name alone. Although I did it voluntarily and wasn’t in jeopardy of not being reimbursed, the process is agonizing.