Designating a Beneficiary
Designating a beneficiary to your bank accounts using your financial institution's official beneficiary designation form may be one of the most important estate planning steps you can take. After obtaining your bank's official form, list the intended recipient's name, address and Social Security number. Sign the form, have it notarized if necessary, then return it to your bank. As an additional safeguard, ask the branch manager at your bank to sign and date the form as well to acknowledge receipt of the information, and retain a copy for yourself.
Checking and Savings Accounts
The funds within individually owned checking and savings accounts can bypass probate and be distributed directly to any individual, or any charity or nonprofit organization recognized by the IRS, that is named as a beneficiary on the account. The beneficiary must simply show the bank a copy of the account holder's death certificate, along with any photo identification and additional documentation required, to request disbursement of the account balance.
Certificates of Deposit
Banks and credit unions have varying policies regarding the distribution of funds held in a certificate of deposit. A single beneficiary may request immediate distribution of the funds by presenting valid photo identification and a copy of the account holder's death certificate. Alternatively -- depending on the financial institution's policies -- the beneficiary may allow to the CD to continue maturing for a specified length of time in the original account holder's name, or transfer the CD to her own name. Regardless, the CD funds are not required to pass through probate prior to distribution as long as a beneficiary is named on the account.
Individual Retirement Accounts
Both federal and state laws govern the disbursement of individual retirement account funds after the account holder's death. Federal law allows the distribution of funds to occur directly to a beneficiary, without the involvement of a probate judge or administrator. However, if you are married and wish to designate someone other than your spouse -- such as a child or grandchild -- as the beneficiary on your retirement account, many states require the IRA plan administrator to have a waiver signed by your spouse before funds can be released to a non-spouse beneficiary after your death. Be sure to check the applicable laws in your home state, and if necessary, have your spouse sign the required waiver for submission to your IRA plan administrator as an addendum when you submit your beneficiary designation form.