Why beneficiaries are important
Why beneficiaries are important
Sound financial management is all about planning for the future—making decisions regarding your money and accounts now that put you and your dependents in a good position for the future. Among the most important decisions you can make is designating a beneficiary for each of your bank accounts, which establishes clear instructions for the transition of funds in the event of your passing. Having beneficiaries in place will make a difficult time for your loved ones a little less stressful as well as provide a pathway to additional FDIC coverage for your accounts.
What is a beneficiary?
A beneficiary on your account is the person or entity designated to inherit the account’s funds in the event of your death. This could be a spouse, family member, friend, trust or organization. Some people designate a charity as their beneficiary. No matter who is designated, they will have clear and direct ownership of the funds after your passing.
Naming a beneficiary can avoid probate
Probate is the often lengthy and costly legal process designed to validate the deceased person’s will and distribute the assets accordingly. Accounts with designated beneficiaries are not required to go through probate. The bank can legally transfer the funds directly to the beneficiary.
Beneficiaries have quick access to funds
When a loved one passes away there are often outstanding financial obligations and funeral expenses that need to be paid. A beneficiary to the deceased’s account will be able to quickly access the funds needed and avoid taking on these costs personally. Without a beneficiary, the assets may be frozen during the probate process and not be available.
Naming a beneficiary eases family conflict
Without a named beneficiary, there may be ambiguity about who should receive the account funds. This ambiguity can result in disputes between family members that can lead to legal challenges. Naming a beneficiary helps avoid this type of conflict, and, instead, provides the family with the peace of mind that the deceased’s wishes were fulfilled.
Beneficiaries mean more FDIC coverage
United States government provides FDIC insurance up to $250,000 per depositor, per insured bank and for each account ownership category for a variety of account types including checking, savings, money market and certificates of deposit. This means that each listed beneficiary on an FDIC-covered account provides an additional $250,000 of coverage.
Questions about adding beneficiaries?
Talking with a banker about beneficiaries is a great first step. Our private banking team works directly with their customers to designate account beneficiaries that align with their long-term financial goals and wealth transfer plans. Connect with us to talk more.
