What Are Beneficiary Designations?
A beneficiary designation is a simple way to pass on wealth. In reference to financial accounts,
it is usually referred to as Payable on Death. In reference to investment accounts, it is usually
referred to as a Transfer on Death. This article is focused on payable on death accounts.
Although the specific rules and procedures may vary from state to state and institution to
institution, here is a general look at bank accounts with a payable on death clause.
First and foremost, you retain complete control of the bank account during your lifetime. You
have no obligation to leave any amount in the account for the beneficiary and, unless you have
also set up your designated beneficiary as a cosigner, the beneficiary has no access to the
account while you are alive.
When you pass away, the account transfers to the designated beneficiary very quickly and
easily. Usually, the designated beneficiary just needs to provide the banking institution with
your death certificate, prove their identity, and fill out some paperwork.
Generally speaking, designating a beneficiary on a bank account overrides a will designation.
This is largely because a beneficiary designation keeps the bank account out of the probate
process. Beneficiary designations usually take priority over all outside estate plans and
agreements—even a divorce agreement or a prenuptial agreement, although the asset could be
pulled back into court if the transfer violates a pre-existing agreement.
That said, you can change the designation at any time while you are alive. So regularly
reviewing and updating your beneficiary designations is important.
If you are opening a new bank account, you can include the pay on death designation at the
outset. If you are interested in adding a beneficiary designation to an existing account, ask your
bank what the process is. It is usually simple and straightforward such as showing your own
identification and providing the beneficiary’s information or handling the whole process
through your online banking portal.
When it comes to your overall estate plan, a beneficiary designation is an efficient way to
transfer some of your wealth to your loved ones so that they can take care of expenses and
obligations that arise due to your death. In order to take advantage of the benefits of a
comprehensive estate plan such as tax planning and asset protection, however, this vehicle may
not be the way you want to pass along a significant amount of money in relation to your entire
Work with a Virginia Estate Planning Attorney
We can help you determine the ideal amount to leave your designated beneficiaries based on your entire estate plan. Contact Wilson Law PLC today at 866-603-5976 to set up a meeting or fill out our contact form and we will call you to schedule your meeting.