When considering inheritance, Certificates of Deposit (CDs) are often included as low-risk investments that can provide valuable cash to beneficiaries. CDs can be obtained from various financial institutions, such as banks, credit unions, or brokerages, and offer a modest return on deposited funds for a specified period.
In the unfortunate event of the account holder’s passing, CDs can serve as a quick source of funds for loved ones. To ensure immediate access to these funds, it is crucial to navigate around the probate process.
How to Secure Your CDs for Inheritance
There are two primary methods to facilitate the transfer of CD funds to heirs:
- Designate beneficiaries on the account and keep the information up-to-date. Most accounts offer a section to input or edit beneficiary details.
- Opt for a joint account rather than an individual one. The co-owner will have immediate access to the funds.
By following either of these steps, the money in your CDs can reach your heirs without the delays associated with probate, which is the legal procedure for estate allocation.
How Probate Affects Savings Accounts
Certificates of Deposit (CDs) face similar treatment to other accounts in the inheritance process. While probate is commonly used to determine asset distribution post-death, there are simpler and cost-effective methods to transfer accounts.
In terms of inheritance, there are three typical scenarios, with only one involving probate:
- Jointly owned property passes directly to the co-owner without probate intervention, applicable to joint accounts, including CDs, and jointly owned real estate.
- Property designated by contract, such as life insurance and retirement accounts, with named beneficiaries, bypasses probate and should have the designated heir added to the CD account information.
- All other property not covered above typically goes through the probate process.
These guidelines apply to all account types, including CDs.
Avoiding Probate for Your CDs
To sidestep probate for your CD funds, consider either adding a payable-on-death (POD) beneficiary or holding the account jointly.
Holding a CD As a Joint Account
Each state has varied rules regarding joint bank accounts’ treatment, particularly in the event of the owner’s demise. The approach dictates how the CD matures and how the joint owner can access the funds post-maturity.
Regardless of the state’s regulations, holding a CD as a joint account eliminates the need for probate.
Adding a POD Beneficiary
Certain CD accounts allow account holders to name a POD beneficiary, simplifying the inheritance process by granting immediate access to the funds upon the account owner’s passing.
Regardless of the procedure, having a POD beneficiary specified ensures the CD avoids probate.
Can I Inherit a CD?
If you are a joint owner of a CD, you typically gain full ownership of the account automatically.
Do CDs Have to Go Through Probate?
If a CD has a named payable-on-death (POD) beneficiary or is held jointly, it should transfer directly without probate.
Can I Use a CD to Avoid Probate?
By opting for a joint account or naming a POD beneficiary, you can prevent the CD from undergoing probate.
Overall, CDs offer a simple method to transfer wealth to heirs efficiently, akin to other financial accounts. Ensuring the appropriate beneficiary designation or joint ownership can streamline the inheritance process without the need for probate.